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Annual report of the North Carolina Office of the State Auditor : accountability, integrity & reliability

Annual report of the North Carolina Office of the State Auditor : accountability, integrity & reliability

honesty • integrity • Professionalism
A R S P
North Carolina O ce of the State Auditor
LESLIE W. MERRITT, JR., CPA, CFP
increasing efficiency... exposing fraud
Increasing Efficiency... Exposing Fraud
3 Message from the Auditor
4 2009 Strategic Plan
7 Executive Summary
9 Financial Audit Division
11 Management Services &
Nongovernmental Compliance Division
14 Investigative Division
22 Performance Audit Division
25 Information Systems Audit Division
29 General Administration
32 Appendix A
39 Appendix B
40 Contact Information
Contents
Annual Report 2008 | Contents
Increasing Efficiency... Exposing Fraud
Annual Report 2008 | Message from the Auditor
S erving as North Carolina’s State Auditor for the last four years
has been a privilege and an honor. The State has seen a growing
emphasis on government ethics as taxpayers increasingly seek
to hold State government accountable for the spending of taxpayer
money. I am pleased to say that the Office of the State Auditor has
played an important role in the process through our audits and
investigations of fraud, waste and abuse of State resources.
One of the single most important factors of holding State
government accountable is transparency. I believe that transparency
is an essential element in the functioning of any representative
democracy. If State government is run from behind a curtain and is
not transparent, its citizenry may grow suspicious of its actions or motivations leading to the public’s
disillusionment and apathy towards government institutions. However, sunshine is a marvelous
antiseptic for this ailment in government and I believe that opening State agencies’ books and records,
with respect for State law and as an effort to increase transparency, is the first step in reversing any
negative trends flowing from past bureaucratic stonewalling and government secrecy.
The Office of the State Auditor is willing to lead by example. History reveals no other time when
technology has provided such an accessible platform as the World Wide Web. Through new technology,
State agencies and departments are able to display accurate and timely information regarding the
spending of taxpayer money. For years the State Auditor’s Office has published its work product
on the World Wide Web in an easily accessible format to enable public scrutiny and review. Now,
we are preparing to take the extra step to increase transparency by publishing the Office’s budget,
expenditures and contract information on our website at www. ncauditor. net.
It is my hope that the Office of the State Auditor is the first of many State agencies willing to take
this step out from behind the government curtain and into the sunlight. I put my faith in the public
trust as I work towards the goal of strengthening State government by increasing transparency and
accountability to the taxpayer. I am willing to do my part, and on behalf of North Carolina’s taxpayers
I challenge other agency and department heads to do the same.
Sincerely,
State Auditor Leslie Merritt
Message from the Auditor
Increasing Efficiency... Exposing Fraud
T he Office of the State Auditor has been
a leader in holding State government
accountable and recommending
government reforms. Beginning with the
release of this report, the State Auditor’s office is
preparing to lead State government into an era of
greater transparency by posting budget, expenses
and contract information on the State Auditor’s
website ( www. ncauditor. net). The available
content will first include Fiscal Years 2007- 2008
and 2008- 2009 with plans to update the current
numbers every quarter and reach back and post
previous fiscal years as we move forward. We
recognize that this is only a first step in greater
transparency in State government and trust that
as the Office of the State Auditor breaks new
ground, other agencies and departments will
follow.
In addition to our focus on increased
transparency, we recognize that the consistent
and professional audits and investigations
performed by State auditors lend assurance and
credibility to other State government agencies’
record of supporting the public. Therefore, it is
incumbent on the Office of the State Auditor
to set challenging, yet attainable goals and
objectives for the 2008- 2009 Fiscal Year. The
following are goals and objects broken- down by
audit division:
Financial Audit Division
The subjects and frequency of audits in our
Financial Audit Division are largely dictated by
State statute or federal requirements and remain
mostly constant every fiscal year. These audits
include State agencies, all sixteen universities,
fifty- eight community colleges, clerks of superior
court in all 100 counties, the state’s Comprehensive
Annual Financial Report ( CAFR), Smart Start
nonprofit organizations, and Fiscal Control audits
at agencies not audited annually.
Smart Start audits are one variable within the
Financial Audit Division. The Office of the State
Auditor is able to contract with private CPA firms
to cost- effectively perform these audits which allow
State auditors to devote themselves to other audits
and uncovering fraud, waste and abuse of State
resources. For the Fiscal Year ended June 30, 2007,
45 Smart Start audits were performed, 39 by CPA
firms averaging $ 9,192 per audit. In prior years, the
average cost for the Office of the State Auditor to
conduct a Smart Start audit was $ 25,459 per audit.
That equals a $ 16,267 savings per audit or $ 634,423
per year. For Fiscal Year 2007- 2008, all Smart Start
audits will be contracted with CPA firms and meet
the goals of increasing savings for the taxpayer.
In addition, the Office of the State Auditor will be
releasing all Smart Start audits by March 31, 2009.
It is anticipated that the earlier release of the audit
reports will allow the North Carolina Partnership
for Children, Inc., and the local partnerships to
more quickly address identified deficiencies and
to make the necessary improvements to ensure
accountability of state funds.
Management Services and
Nongovernmental Compliance Division
The Management Services and Nongovernmental
Compliance Division ( MS& NGCD) focuses on
the spending of State and federal pass- through
2009 Strategic Plan
North Carolina Office of the State Auditor
Increasing Efficiency... Exposing Fraud
grants to non- profits. In Fiscal Year 2008- 2009,
MS& NGCD will focus on the administration
of the Grants Information Center ( GIC) online
reporting system that opened in 2008 and
will streamline the process of satisfying filing
requirements of State grants.
Most non- profits satisfy their grant requirements
and filing deadlines. However, increased
monitoring resulting in a decrease in the level
of noncompliance is a goal that will ensure that
taxpayers’ money reaches the communities it was
intended to serve. The reality is that the number
of noncompliant grantees ebbs and flows with
reporting deadlines. MS& NGCD’s goal for Fiscal
Year 2008- 2009 is to continue efforts to reduce the
number of noncompliant grants by 15%, keeping
the total value of those in noncompliance to no
more than 5% of the total grants awarded.
In addition to monitoring compliance levels,
MS& NGCD is equipping non- profits with the
necessary skills needed to properly account for
State grant funds and to remain in compliance.
These skills can be learned through MS& NGCD’s
available training courses. MS& NGCD plans to
continue the State Auditor’s efforts for Fiscal Year
2008- 2009 by offering both live and online grants
training. MS& NGCD will conduct a minimum
of six live sessions per month, in addition to
offering online courses in an e- Learning format
that includes a course test for each participant. An
important part of training is providing information
to grantees and grantors that is relevant to their
particular circumstances. To aid in this effort, the
MS& NGCD will continue to issue its Best Practices
quarterly newsletter and identify other efforts to
benefit both grantors and grantees. Best Practices
is distributed to all 5,000+ grantees identified in
our grants database, as well as to agency personnel
involved with grants administration.
To ensure accountability and compliance,
the Office of the State Auditor investigates
the spending of grant funds by non- profit
organizations. The goal for Fiscal Year 2008- 2009
is to increase the number of new investigations
to 40 by the end of this fiscal year, a 48% increase
in investigations. In an effort to help train agency
monitors to be proactive, MS& NGCD plans to
conduct separate monitoring reviews of grantor
agencies. For Fiscal Year 2007- 2008, these reviews
were conducted in conjunction with the grant
investigation. MS& NGCD’s goal is to complete 12
separate agency monitoring reviews by the end of
Fiscal Year 2008- 2009.
Investigative Division
The Investigative Division forms the core of the
Office of the State Auditor’s watchdog function.
Through this Division, the State Auditor’s Office is
able to proactively uncover fraud, waste and abuse
in State government. The Investigative Division’s
goals for Fiscal Year 2008- 2009 are to effectively
promote the State Auditor’s Hotline, enhance
the Investigative Task Force and increase the
efficiency and effectiveness of handling multiple
investigations simultaneously.
The Investigative Division achieved remarkable
results for the 2007- 2008 Fiscal Year. Specifically,
the Division had 29 open cases as of July 11, 2007,
and opened 257 during Fiscal Year 2007- 2008. The
State Auditor’s Office and the respective agencies
assisting with referrals closed 241 cases, with 45
pending serious matters as of June 30, 2008. The
average age of cases closed was 57 days. Nearly
doubling the intake while using half the time to
resolve these matters is a credit to the women and
men of the Investigative Division, and the internal
Annual Report 2008 | Strategic Plan
Increasing Efficiency... Exposing Fraud
auditors of the various state agencies who have
come to work more closely and effectively with the
State Auditor and his staff.
Performance Audit Division
Compared to other divisions in the Office of
the State Auditor, the Performance Audit Division
is uniquely engineered to evaluate whether State
programs are reaching their goals. For Fiscal Year
2008- 2009, the Division plans to conduct more
performance audits than in Fiscal Year 2007- 2008,
equip performance auditors with additional tools
through new training, and provide greater flexibility
to meet emerging needs when they arise.
The Performance Audit Division was recognized
by the National State Auditors Association for best
2008 performance audit less than 2000 hours. The
audit entitled Internal Auditing in North Carolina
Agencies and Institutions is an example of the type
of performance audits that will continue to be
conducted by the Office of the State Auditor in
Fiscal Year 2008- 2009.
Information Systems Audit Division
The Information Systems ( IS) Audit Division’s
responsibilities include analyzing State agency
computer systems to ensure that they are properly
secured, produce accurate financial reports and
comply with State regulations. IS Division auditors
are in a unique position to think proactively about
discovering suspicious data trends flowing from
an agency’s information systems.
The State Auditor’s goal for Fiscal Year 2007-
2008 was to continue the collaboration between
IS auditors and the Financial and Investigative
audit teams and to increase proactive auditing
by providing computer forensic assistance and
data mining analyses of agency financial data. At
a university official’s request, the State Auditor
used that collaborative effort to uncover a widely
reported case regarding university employees
using taxpayers’ resources to operate an unlawful
pirating ring that downloaded Hollywood movies
and pornographic pictures and films. For the 2008-
2009 Fiscal Year, the Office of the State Auditor
plans to continue this collaboration and increase
its focus on fraud, waste and abuse in the State’s
information technology systems.
The IS Audit Division performs Strategic
Audit Reviews that are issued separately from IS
audits. These reviews are used to uncover fraud,
waste or abuse of taxpayer resources by following
suspicious State agency data trends. A recent target
of an IS Strategic Audit Review was to identify
invalid Social Security Numbers ( SSNs) in the
North Carolina Division of Social Services. This
review found 1,906 SSNs that were invalid. The
review also found 1,237 SSNs that belonged to the
deceased persons category on the Social Security
Administration’s Death File. Finally, the review
found 69 food stamp recipients with a certification
date equal to or greater than 45 days after their date
of death. The IS Audit Division plans to conduct
a greater number of Strategic Audit Reviews in
Fiscal Year 2008- 2009.
In addition to investigative activities, the IS
Audit Division is currently implementing an
upgrade to the Agency’s existing audit software.
This software will allow easier access to auditee
data by auditors in other sections of the office and
will allow the use of a built in “ Extract, Transmit,
and Load” ( ETL) technology that will expedite
the acquisition of agency data to be used by the
Financial Auditors in financial audits and by IS
auditors in their strategic reviews.
North Carolina Office of the State Auditor
Increasing Efficiency... Exposing Fraud
Financial Audit Division
• State Auditors identified $ 1,180,411 in questioned
costs resulting from 129 identified audit
findings. This represents a significant increase in
questioned costs and the number of findings over
the prior year ($ 507,833 and 89, respectively).
• The Office of the State Auditor saved a recurring
$ 634,413 on 39 Smart Start audits by contracting
with private CPA firms for Fiscal Year 2007- 2008.
In Fiscal Year 2008- 2009, the Agency plans to
contract- out all Smart Start audits to increase
this savings for the taxpayer.
Management Services and
Nongovernmental Compliance Division
• During Fiscal Year 2007- 2008, the State
Auditor’s Office trained 2,882 participants in 99
training sessions on improving accountability
and compliance with state and federal grant
requirements. That brings the total number
of participants trained since August 2005 to
approximately 11,075.
• While the monthly percentage varies, the rate
of grant recipients in noncompliance with their
grant requirements dropped 7% from July 1, 2007
to June 30, 2008. That represents a decline in the
percentage of noncompliant grantees to 11.4%
of total grants ( 2.9% of total grant dollars). This
reflects the proper accounting of an additional
$ 13.1 million.
��� In February 2008, the State Auditor opened
the online Grants Information Center ( GIC)
allowing grantor agencies and non- State grantees
to file annual reports online. By June 30, 2008,
more than 1,500 grantees used GIC to file their
2007 annual reports online. Improvements
through GIC will help eliminate redundancy,
increase data capture efficiency and improve
reporting timeliness.
• For Fiscal Year 2008- 2009, MS& NGCD carried
forward four grant investigations from Fiscal
Year 2007- 2008, opened 25 and completed 27
investigations. These investigations resulted in the
State Auditor’s Office recommending repayment
of $ 797,692 in grant funds, equal to an average of
$ 29,544 per investigation.
Investigative Division
• The Investigative Division had 29 open cases as
of July 2007 and opened 257 cases during Fiscal
Year 2007- 2008.
• The State Auditor’s Office and the respective
agencies assisting with referrals closed 241 cases
in Fiscal Year 2007- 2008, with 45 cases pending.
• The State Auditor’s Office reduced the average
case age to 57 days from 315 days in Fiscal Year
2004- 2005.
Performance Audit Division
• The Performance Audit Division was recognized
by the National State Auditors Association for best
2008 performance audit less than 2000 hours. The
audit entitled Internal Auditing in North Carolina
Agencies and Institutions is an example of the type
of valuable contribution the Performance Audit
Division makes to the Office of the State Auditor
and State government in general.
Executive Summary
Annual Report 2008 | Executive Summary
Increasing Efficiency... Exposing Fraud
• Performance Audits conducted in Fiscal
Year 2007- 2008 include: the North Carolina
Education Lottery, Albemarle Mental Health
Center, Academically or Intellectually Gifted
Program, Department of Transportation
Highway Schedules and Costs, Department of
Juvenile Justice and Delinquency Prevention,
Department of Health and Human Services
Division of Medical Assistance, Department of
Environment and Natural Resources.
Information Systems Audit Division
• The IS Audit Division conducted Strategic Audit
Reviews of North Carolina Division of Social
Services and North Carolina State University.
These reviews uncovered thousands of invalid
Social Security Numbers and university
employees using taxpayer money for their
personal use.
General Administration
• The follow- up to the 2006 AuditWatch
curriculum was completed in 2007. Efficiency
levels were analyzed and recommendations
from AuditWatch were implemented with
impressive results. In 2005, the Office of the
State Auditor used 103,703 audit hours in
the Financial Audit Division alone. After the
AuditWatch efficiencies were in place, the
Financial Audit Division used only 87,358 audit
hours. This equates to a total efficiency gain of
15,980 audit hours or $ 1,358,300 ( audit hours x
billing rate).
• In 2008, the State Auditor’s Office became an
authorized Continuing Professional Education
( CPE) sponsor recognized by the NC State Board
of CPA Examiners. This is part of the ongoing
commitment by the State Auditor to conduct
quality continuing education.
North Carolina Office of the State Auditor
Increasing Efficiency... Exposing Fraud
S taff in the Financial Audit Section audit state
agencies, universities, community colleges,
clerks of Superior Court, and Smart Start
nonprofit organizations. The State Auditor is
required to perform these audits as part of its
statutory responsibilities or to comply with federal
requirements. Some audits are performed at the
State Auditor’s discretion to ensure that all agencies
are properly reporting their financial conditions.
The Office of the State Auditor spent the greatest
percentage of hours ( 49%) to perform annual
financial statement audits including those of the
State’s sixteen universities and fifty- eight community
colleges. One of its largest financial audits is the
state’s Comprehensive Annual Financial Report
( CAFR), which accounted for 15% of staff hours.
The CAFR contains the annual financial statements
for the State of North Carolina as a whole.
Another major financial audit project, accounting
for 29% of staff time, is the state’s Single Audit
Report. The Single Audit Report contains the
results of the audit of the state’s financial statements
and the audit of the state’s compliance with laws and
regulations pertaining to federal grant programs.
The Agency also periodically audits selected fiscal
controls of clerks of Superior Court and general
government agencies.
The audit staff conducts financial and compliance
audits of the organizations participating in the
Smart Start program, including the statewide
coordinating agency ( The North Carolina
Partnership for Children, Inc.) and the individual
local partnerships. Smart Start is an early childhood
development program designed to prepare children
to begin school healthy and ready to succeed.
Currently, 78 Smart Start partnerships operate
throughout the state.
Financial Audit Results Summary
For the fourteenth consecutive year, the State Au-ditor
issued an unqualified opinion on the State’s fi-nancial
statements. This opinion, for the Fiscal Year
ended June 30, 2007, was contained in the CAFR
prepared by the Office of the State Controller.
The State of North Carolina also received the
Certificate of Achievement for Excellence in Fi-nancial
Reporting from the Government Finance
Officers Association for the fourteenth consecu-tive
year. This award is given to government units
whose CAFR achieves the highest standards in gov-ernment
accounting and financial reporting.
In conjunction with the audit of the State’s finan-cial
statements, the State Auditor issues a report
on internal control over financial reporting and on
compliance and other matters based on an audit
of financial statements in the Single Audit Report.
Nine findings of non- compliance and weaknesses
in internal control related to the financial statement
audit were reported. These findings disclosed inter-nal
control deficiencies related to separation of du-ties,
year- end financial reporting, and approval of
journal entries.
With regard to compliance with federal program
requirements, the State Auditor issued a qualified
opinion on certain federal programs due to mate-rial
noncompliance with certain requirements. In
total, auditors identified $ 1,180,411 in questioned
costs resulting from 129 identified audit findings.
Financial Audit Division
Annual Report 2008 | Financial Audit Division
0 Increasing Effi ciency... Exposing Fraud
Th is represents a signifi cant increase in questioned
costs and the number of fi ndings over the prior year
($ 507,833 and 89, respectively).
In addition to reporting on the CAFR and Single
Audit at the statewide level,
the Offi ce of the State Audi-tor
publishes in separately
issued reports the audit fi nd-ings
and recommendations
from CAFR and Single Au-dit
work for each individual
government agency.
Reported fi ndings from
university and community
college audits for Fiscal Year
2007 primarily related to four
areas: access rights, fi nan-cial
statement preparation,
management oversight and
internal control weaknesses.
Th ese internal control weak-nesses
were in areas such as
fi nancial aid awards, cash
receipts and deposits, cash
disbursements and separa-tion
of duties.
In the Clerk of Superior
Court audits performed in
Fiscal Year 2007, the State Auditor’s Offi ce noted
internal control weaknesses. Th ese internal control
weaknesses were in areas such as timely invest-ments,
cash receipts, segregation of duties, and
timely deposits.
Smart Start fi ndings issued during 2006- 2007 fo-cused
on internal control weaknesses and fi nancial
statements errors. For the Fiscal Year ended June
30, 2007, 45 Smart Start audits were performed,
39 by CPA fi rms averaging
$ 9,192 per audit. In prior
years, the average cost for the
Offi ce of the State Auditor to
conduct a Smart Start audit
was $ 25,459 per audit. Th at
equals a $ 16,267 savings per
audit or $ 634,423 per year.
For Fiscal Year 2007- 2008,
all Smart Start audits will be
contracted with CPA fi rms
and meet the goal of increas-ing
savings for the taxpayer.
In addition, the Offi ce
of the State Auditor will be
releasing all Smart Start au-dits
by March 31, 2009. It is
anticipated that the earlier
release of the audit reports
will allow the North Caroli-na
Partnership for Children,
Inc., and the local partner-ships
to more quickly ad-dress
identifi ed defi ciencies
and to make the necessary improvements to ensure
accountability of state funds.
A complete list of Financial Audit Division au-dits
( prefi xes FCA, FIN and NGV) is detailed in
Appendix A.
In total, auditors
identifi ed $ 1,180,411
in questioned costs
resulting from
129 identifi ed
audit fi ndings.
Th is represents a
signifi cant increase
in questioned costs
and the number of
fi ndings over the prior
year.
North Carolina Office of the State Auditor
Increasing Effi ciency... Exposing Fraud
Management Services &
Nongovernmental Compliance
Division
T he Management Services and
Nongovernmental Compliance Division
( MS& NGCD), has the responsibility of
increasing oversight and accountability of State
and Federal pass- through grants typically given
to nonprofi t organizations. MS& NGCD responds
to the growing need for compliance oversight
and training to adhere to changing reporting
requirements.
MS& NGCD’s mission is to increase training
and “ best practices” for nonprofi t organizations
receiving State grants and to increase compliance
and accountability of funds on the grantee and
funding agency levels. MS& NGCD has set
measurable goals for Fiscal Year 2008- 2009 based
on past accomplishments.
Th e Offi ce of the State Auditor is pleased to
report that MS& NGCD continues to meet all areas
of its original mission. Th e following is a summary
of accomplishments for Fiscal Year 2007- 2008:
Training
• Grants Training: During Fiscal Year 2007- 2008,
MS& NGCD trained 2,882 participants in 99
training sessions, bringing the total number
of participants trained since August 2005 to
approximately 11,075.
• Eff ective Grants Administration Certifi cate
Program: Working with the Offi ce of State
Personnel, MS& NGCD established the Eff ective
Grants Administration Certifi cate Program
in 2007, consisting of fi ve core grants training
courses that provide the basics for proper
oversight and accountability of grant funds.
During Fiscal Year 2007- 2008, 61 grantee and
agency personnel have earned this Certifi cate
bringing the total number of Certifi cate holders
to 120.
• Multifaceted Training: Other types of training
included grants administration sessions tailored
to State agency program and fi nancial personnel,
grants reporting/ accountability sessions tailored
to grantees, special sessions conducted at the
request of various groups ( e. g., specifi c agencies
and state level associations of various types)
and presentations at 16 conferences during the
Fiscal Year 2007- 2008.
Compliance
• Increased Grantee Compliance: Posting
of the monthly noncompliance list on the
State Auditor’s website has served to inform
legislators, State funding agencies, and the
public which grantees have not complied with
the statutory reporting requirements. While the
monthly percentage varies, the noncompliance
rate dropped 7% from July 1, 2007 to June 30,
2008. Th at represents a decline in the percentage
of noncompliant grantees to 11.4% of total
grants ( 2.9% of total grant dollars). Th is refl ects
Annual Report 2008 | Management Services & Nongovernmental Compliance Division
12 Increasing Efficiency... Exposing Fraud
the proper accounting of an additional $ 13.1
million.
• Online Reporting Program: A major focus
of MS& NGCD for Fiscal Year 2008- 2009 is
finalizing the implementation of the North
Carolina Grants Information Center ( GIC). GIC
opened to grantors and grantees on February
28, 2008 and allows grantor agencies and non-
State grantees to file annual reports online. By
July 30, 2008, more than 1,500 grantees used
GIC to file their 2007 annual reports online.
Improvements through GIC will help eliminate
redundancy, increase data capture efficiency,
and improve reporting timeliness.
Best Practices and Research Assistance
• Quarterly Best Practices Newsletter: This
newsletter updates grantees on state grant
requirements, potential financial accountability
problems and developing adequate internal
policies and accounting controls. MS& NGCD
published four quarterly issues during Fiscal
Year 2007- 2008 with an email distribution of
more than 6,000. All issues are posted on the
State Auditor’s website ( www. ncauditor. net).
• Research and Reporting Assistance: MS& NGCD
continues to provide assistance, via telephone
or email, on unique, confusing or complicated
questions related to grants reporting and the
implementation of the GIC. Many of these
questions require research of both grantee and
grantor issues, with 519 requiring detailed
research.
• Current Documents and Formats: MS& NGCD
provides grantees and funding agencies with
information on required grant reporting
documents and formats through developing,
updating and maintaining online forms dictated
by the reporting statute.
Agency and Grantee Examinations
• Grant Investigations: For Fiscal Year 2007-
2008, MS& NGCD carried forward four grant
investigations from Fiscal Year 2006- 2007,
opened 25 and completed 27 investigations.
These investigations resulted in the State
Auditor’s Office recommending repayment of
$ 797,692 in grant funds, equal to an average of
$ 29,544 per investigation.
• Investigation Training Tools: MS& NGCD uses
the investigation process to educate State agency
personnel on monitoring techniques and to
suggest improvement to those techniques.
In addition, the investigation provides an
excellent opportunity to provide best practice
information on improving accountability
directly to grantees.
Special Projects
• Local Government Grants: MS& NGCD
continues to work closely with the Local
Government Commission at the state level to
identify and capture data on the approximately
$ 12 billion in grants flowing to local government
units.
Goals for Fiscal Year 2008- 2009
For Fiscal Year 2008- 2009, MS& NGCD will
focus on administration of the Grants Information
Center ( GIC) online reporting system. We will
continue to conduct training sessions statewide
for both funding agency and grantee personnel
North Carolina Office of the State Auditor
Increasing Effi ciency... Exposing Fraud
on the use of the GIC, as well as basic grant
functions. Th e GIC has increased the accuracy
and timeliness of grants data to all interested
parties while signifi cantly decreasing the workload
of the funding agencies
and the Offi ce of the State
Auditor. Th e GIC aff ords
both grantor agencies and
grantees a much simpler
method of complying
with statutory reporting
requirements.
Compliance reporting
and subsequent
processing is an important
bench mark in how
eff ective MS& NGCD
is at compliance and
accountability. Th e
number of noncompliant
grantees will ebb and
fl ow with reporting
deadlines. However, the
GIC will greatly improve
the timeliness of adding
noncompliant grantees
and removing grantees from the noncompliance
list when delinquent reports are provided. Th e
data in the GIC is updated nightly and will allow
the public to pull up a report showing the most
current noncompliance and suspension lists.
MS& NGCD’s goal for Fiscal Year 2008- 2009
is to continue eff orts to reduce the number of
noncompliant grants by 15%, keeping the total
value of those in noncompliance to no more than
5% of the total grants awarded.
Coordinating and cooperating with the grantor
agency is of primary importance to successfully
monitor and review nonprofi ts and their grantor
agencies. Th e goal for Fiscal Year 2008- 2009 is
to increase the number of new investigations to
40, a 48% increase in investigations. In an eff ort
to help train agency monitors to be proactive,
MS& NGCD plans to conduct
separate monitoring reviews
of grantor agencies. For
Fiscal Year 2007- 2008, these
reviews were conducted in
conjunction with the grant
investigation. MS& NGCD’s
goal is to complete 12 separate
agency monitoring reviews in
Fiscal Year 2008- 2009.
Training is an important
function of MS& NGCD,
and we plan to continue our
eff orts in Fiscal Year 2008-
2009 by off ering both live
and online grants training.
MS& NGCD will conduct a
minimum of six live sessions
per month, in addition to
off ering online courses in
an e- Learning format that
includes a course test for
each participant. An important part of training
is providing information to grantees and grantors
that is relevant to their particular circumstances.
To aid in this eff ort, MS& NGCD will continue to
issue its Best Practices quarterly newsletter and
identify other eff orts to benefi t both grantors
and grantees. Best Practices is distributed to all
5,000+ grantees identifi ed in our grants database,
as well as agency personnel involved with grants
administration.
A complete list of MS& NGCD reports ( prefi x
GRA) is detailed in Appendix A.
During Fiscal Year
2007- 2008, MS& NGCD
trained 2,882 participants
in 99 training sessions,
bringing the total number
of participants trained
since August 2005 to
approximately 11,075.
Annual Report 2008 | Management Services & Nongovernmental Compliance Division
Increasing Effi ciency... Exposing Fraud
T he Offi ce of the State Auditor’s Investiga-tive
Division has proven to be an eff ec-tive
tool for investigating allegations of
fraud, waste and abuse of State resources. Rely-ing
on State constitutional and statutory authority,
this Division of the State Auditor’s Offi ce exposes
the variety and frequency of
improper governmental ac-tivities
and abuses in State
government. Furthermore,
the State Auditor publishes
all material fi ndings in a
public report, and refers all
substantiated allegations
of criminal activity to law
enforcement and to the rel-evant
legal authorities for
investigation and prosecu-tion.
Th e majority of tips that
lead to investigations come
from the State Auditor’s
confi dential, 24- hour, toll-free
hotline [ 1- 800- 730-
TIPS ( 8477)]. Th is hotline is
designed for State employees
and the general public to report activities they
believe may be illegal or improper. Allegations of
fraud, waste and abuse may also be reported by
traditional mail or hotline@ ncauditor. net.
To protect the integrity of tips, allegations of
improper governmental activities are strictly
confi dential. In addition, State law provides
protection from retaliation or discrimination for
whistleblowers who report improper or illegal
activities to the State Auditor. Th e Investigative
Division takes seriously and responds accordingly
to all specifi c and credible allegations of improper
governmental activities, but is especially concerned
about allegations of retaliation that may bring a
chilling eff ect on future tips.
Th e Offi ce of the State
Auditor satisfi ed the
statutory requirement to
periodically promote the
State Auditor’s Hotline
in Fiscal Year 2007- 2008.
Consequently, the number
of cases opened has nearly
doubled since the previous
fi scal year. In addition, the
average case age has been
reduced by over 50%. Th e
Offi ce of the State Auditor
has eff ectively responded
to staffi ng needs of the
Investigative Division, and
the mission of this Division
has evolved into addressing
the more egregious and
notorious cases of fraud,
waste and abuse. Even those matters referred
by the State Auditor to other agencies’ internal
auditors are monitored by the Auditor’s staff for
timely inquiry and resolution.
Th e goals for Fiscal Year 2008- 2009 are to
eff ectively promote the State Auditor’s Hotline,
enhance the Investigative Task Force and increase
the effi ciency and eff ectiveness of handling
multiple investigations simultaneously.
Investigative Division
Th e Division had 29 open
cases as of July 11, 2007,
and opened 257 during
Fiscal Year 2007- 2008.
Th e State Auditor’s Offi ce
and the respective agencies
assisting with referrals
closed 241 cases, with 45
pending serious matters as
of July 30, 2008.
North Carolina Office of the State Auditor
Increasing Effi ciency... Exposing Fraud
In the fall of 2007, the Offi ce of the State Auditor
launched a statewide television ad blitz featuring
two 30 second spots designed to expose fraud,
waste and abuse in State government. Th is one
area is unique in that money spent to promote
the Hotline has reaped a far greater amount in
savings to the taxpayers when fraud, waste and
abuse of State money is uncovered. Timing of
this promotion was key, since the Investigative
Division prepared itself to
handle the sharp increase
in new cases. Specifi cally,
the Division had 29 open
cases as of July 11, 2007, and
opened 257 during Fiscal
Year 2007- 2008. It should be
noted that this number does
not include immediate and
undocumented referrals.
Th e State Auditor’s Offi ce
and the respective agencies
assisting with referrals
closed 241 cases, with 45
pending serious matters as
of July 30, 2008. In addition,
the average case age was 57
days. Nearly doubling the
intake while using half the
time to resolve these matters is a credit to the
women and men of the Investigative Division,
and the internal auditors of the various state
agencies who have come to work more closely and
eff ectively with the State Auditor and his staff .
Building on the team- centered approach that
was begun in 2005, the Offi ce of the State Auditor
launched a new entity labeled the Investigative Task
Force ( ITF) in 2007. Led by the new head of the
Investigations Division and the Chief Deputy State
Auditor, the ITF is designed to steer investigations
when a deeper vein of fraud, waste or abuse is
detected by using standard auditing techniques,
while applying more innovative investigative
and cyber- driven methods. Being comprised of
auditors and staff with investigative, performance,
non- profi t compliance, fi nancial and information
system backgrounds, the ITF is positioned to
follow “ risk- based” leads and then drill down to
the source of fraud, waste or
abuse of public resources.
Th e following are
summaries of the more
notable cases in Fiscal Year
2007- 2008. A complete list
of Investigative Division
reports ( prefi x INV) is
detailed in Appendix A.
North Carolina Central
University
Th e Offi ce of the State
Auditor received an
allegation through the
State Auditor’s Hotline
concerning improper
payments of $ 2,000 checks
to an undergraduate student
and her acquaintances by the North Carolina
Central University Assistant Provost and Associate
Vice- Chancellor of Academic Aff airs ( Assistant
Provost). Allegedly, the Assistant Provost
authorized and made payments for University
work that was not performed and received portions
of the money in return so he could make payments
on his University- issued credit card.
Investigators found that the Assistant Provost
inappropriately authorized graduate assistant
Investigators found that
the Assistant Provost
inappropriately authorized
graduate assistant contracts
and honoraria for unauthorized
individuals. Th e review
discovered nine payments,
totaling $ 36,041, improperly
authorized by the Assistant
Provost.
Annual Report 2008 | Investigative Division
16 Increasing Efficiency... Exposing Fraud
contracts and honoraria for unauthorized
individuals. The review discovered nine payments,
totaling $ 36,041, improperly authorized by the
Assistant Provost. Seven of these payments
were cashed with a total value of $ 15,341. Two
remaining payments valued at $ 20,700 were
authorized or issued but never cashed. In
addition, a review of credit card statements for
the Assistant Provost’s credit card issued by the
University revealed delinquency charges, a notice
of account cancellation and a notice to assign the
account to a collection agent. These findings lend
credibility to the complainant’s assertion that the
Assistant Provost’s actions were taken to help
make his credit card payments.
Investigators also found two employment forms
initiated by the Assistant Provost for an unqualified
student that contained false authorization
signatures and other documentation with either
false information or lack of sufficient approvals.
Further, the review revealed the Assistant Provost
did not report an improper relationship with an
undergraduate student to University officials.
Other findings included the Assistant Provost
charging personal expenses to the University-issued
credit card, graduate assistant payments
were improperly charged to federal grants, and
lack of proper approvals and justifications for
honoraria payments.
Several findings from this investigation
were referred to the U. S. Attorney’s Office,
the District Attorney, and the State Bureau of
Investigation. Investigators recommended the
strongest disciplinary action available against the
Assistant Provost, collection of reimbursement
for unauthorized expenses, and improved
administrative controls. As a result of our
review, the University removed the Assistant
Provost from all administrative responsibilities
and ultimately terminated his employment. In
addition, the Assistant Provost paid restitution to
the University.
Department of Health And Human Services
– Adult Care Licensure Section
The Office of the State Auditor received a com-plaint
through the State Auditor’s Hotline concern-ing
the procedures performed by the North Caro-lina
Department of Health and Human Services’
Adult Care Licensure Section ( ACLS) regarding
its oversight of two adult care homes, one licensed
and the other, unlicensed.
The investigation found that ACLS allowed a li-censed
home’s management structure to continue
in violation of State law despite the high risk of
resident injury or death as documented in a May
2007 citation. The May 2007 citation documented
the improper use of a restraint which resulted in
the death of one resident. After receiving a sus-pension
of admissions and numerous citations, the
adult care home received new ownership although
it continued to include one of the former owners
in the new ownership structure. The North Caro-lina
Administrative Code prohibits the approval of
a new license to management that had a license
suspension in the prior six months.
In addition, the investigation found that ACLS
did not promptly respond to violations discovered
in a county investigation of an unlicensed home.
Furthermore, ACLS failed to notify the respon-sible
persons of the home’s residents that the home
received a cease of operations letter that precluded
the home from feeding and administering medi-cations
to their residents. As a result, this unli-censed
home remained in operation after the cease
operations notification which allowed residents to
North Carolina Office of the State Auditor
Increasing Effi ciency... Exposing Fraud
remain in an environment that jeopardized their
health and safety.
Investigators recommended changes in the li-cense
approval procedures, a restructuring of
complaint responses, and an improved notifi ca-tion
process.
North Carolina
Central University
Th e Offi ce of the State Au-ditor
was contacted by the
University of North Caroli-na
General Administration
aft er they became aware of
allegations regarding po-tential
inappropriate use of
the North Carolina Cen-tral
University ( University)
computer networks. Alleg-edly,
employees within the
University’s Information
Technology Services De-partment
misused the Uni-versity’s
networks and computers by downloading
copyrighted and pornographic materials. In addi-tion,
these employees allegedly circumvented pur-chasing
procedures to acquire items for personal
use.
Forensic analysis of computers and interviews
confi rmed that two University employees misused
University networks by downloading movies,
music, games, soft ware, and pornography. Th e
Data Base Administrator and Information Tech-nology
Manager used the higher- speed Univer-sity
network and servers to download these items
from unauthorized sources. In addition, these
employees distributed these copyrighted materi-als
to friends and business associates in potential
violation of federal copyright law. Investigators
also determined that the Information Technology
Manager was granted access to servers at North
Carolina State University to download music. Un-authorized
access of government computers vio-lates
North Carolina General Statutes.
In compliance with State
law, the State Auditor no-tifi
ed the North Carolina
Attorney General and ap-propriate
law enforcement
agencies of apparent in-stances
of malfeasance, mis-feasance,
or nonfeasance by
an offi cer or State employee.
Auditors recommended
University management
take strong disciplinary ac-tion
against these employ-ees,
determine the extent of
potential security breaches,
off er training to employees,
and work with law enforce-ment
as appropriate. Th e University released these
individuals from employment.
Other fi ndings in the report included the lack
of adequate controls over fi xed assets, absence of
requirements for employees to complete second-ary
employment forms, and inadequate verifi ca-tion
of education and employment credentials
when hiring and promoting employees. Auditors
recommended improved procedures to track fi xed
assets, additional training, and a course of action
for any discrepancies noted during the application
process.
North Carolina State University
During the course of a review at North Carolina
Employees within the
University’s Information
Technology Services
Department misused the
University’s networks and
computers by downloading
copyrighted and
pornographic materials
Annual Report 2008 | Investigative Division
18 Increasing Efficiency... Exposing Fraud
Central University, auditors became aware of a
connection between an information technology
employee at North Carolina State University and
employees under investigation at North Carolina
Central University. Allegedly, the North Carolina
State University employee allowed individuals ex-ternal
to the organization to access the University
computer network to share music files. In addition,
we received allegations that the employee was in-volved
in illegal downloading and distribution of
copyrighted materials.
Forensic analysis of computers and interviews
confirmed that the Operations and Systems Ana-lyst
misused University networks by downloading
movies, music, games, software, pornography, and
violent images. Some of these files were buried
deep within sub- folders indicating an apparent at-tempt
to conceal the content from detection. The
Operations and Systems Analyst used the Univer-sity
servers because of the faster connection speed.
In addition, he admitted to distributing copyright-ed
materials to friends and business associates as
well as using software to break encryption that
protects copyrights.
The investigation also revealed that the Opera-tions
and Systems Analyst intentionally deleted all
information contained on his University- issued
laptop to conceal inappropriate use. Further, he
attempted to notify co- workers to delete suspi-cious
activity. Intentional damage to a govern-ment
computer and obstruction of an audit are
violations of State law.
In addition, the Operations and Systems Ana-lyst
provided access to a University server to al-low
a friend to download music files. State law
prohibits the unauthorized granting of access to a
government computer.
In compliance with State law, the State Audi-tor
notified the North Carolina Attorney General
and appropriate law enforcement agencies of ap-parent
instances of malfeasance, misfeasance, or
nonfeasance by an officer or State employee. Au-ditors
recommended University management take
strong disciplinary action against the employee,
determine the extent of potential security breach-es,
offer training to employees, and work with
law enforcement as appropriate. The University
placed the employee on investigative leave and he
subsequently terminated employment.
North Carolina General Assembly
Investigators received a complaint through the
State Auditor’s Hotline related to a potential con-flict
of interest involving a North Carolina Sena-tor
and his involvement with the day- to- day op-erations
of a stock car racing team owned by his
son and whose major sponsor at the time was Blue
Cross Blue Shield of North Carolina ( BCBSNC).
A review of the allegations confirmed the relation-ship
between the Senator’s son’s racing team and
BCBSNC and revealed that another company the
Senator co- owns with his son has a direct financial
relationship with the racing team. The racing team
used property owned by a company co- owned by
the Senator as collateral to secure a $ 150,000 line
of credit.
Because BCBSNC is a major sponsor of the rac-ing
team and is a company that does business be-fore
committees upon which the Senator presides
( including one which he co- chairs), this situation
is a potential conflict. Furthermore, the potential
conflict of interest was not properly disclosed on
the Statement of Economic Interest filed with the
State Ethics Commission as required. Auditors
recommended that the Senator include all busi-ness
and personal relationships that may create an
North Carolina Office of the State Auditor
Increasing Effi ciency... Exposing Fraud
actual or potential confl ict of interest explicitly as
required by the Statement of Economic Interest.
Piedmont Community College
Th e Offi ce of the State Auditor received an al-legation
that the Director
of the Educational Op-portunity
Center ( EOC)
at Piedmont Community
College ( College) forced
her staff members to submit
false Annual Performance
Reports to the U. S. Depart-ment
of Education. Th e in-vestigation
confi rmed that
the EOC Director submit-ted
Annual Performance
Reports that included in-eligible
individuals to meet
program goals. Intentional
misrepresentation on these
reports is a violation of fed-eral
law.
Th e review also found
that the Director submit-ted
a fi ctitious hotel receipt for reimbursement of
$ 1,646.87, allowed ineligible family members of
staff to attend retreats at a cost of $ 7,668.33, and
gave special benefi ts to family members through
the EOC program. Th e Director included her
son and daughter- in- law as program participants
without proper documentation and provided her
son a cellular phone purchased with grant funds.
Investigators recommended the College reim-burse
the federal granting agency, seek restitution
from the Director, revise the Annual Performance
Reports, and take disciplinary action against the
EOC Director. Th e EOC Director resigned eff ec-tive
March 31, 2008. Pursuant to State law, the
results of the investigation were forwarded to ap-propriate
law enforcement authorities.
University of North
Carolina At Greensboro
Th e Offi ce of the State
Auditor received a com-plaint
through the State Au-ditor’s
Hotline concerning
the improper contracting
for services and related em-ployment
issues at the Uni-versity
of North Carolina at
Greensboro ( UNC- G). Au-ditors
found that the Vice
Chancellor for Information
Technology Services ( ITS)
used $ 431,925 in State funds
to bypass University policy
and inappropriately hire a
contractor referred through
an associate. Th e Vice Chan-cellor
also authorized a pay
increase from $ 150 to $ 200 per hour aft er the con-tractor
requested a higher rate despite the lack of
written justifi cation. Further review revealed a
lack of competition for other contracts for services.
State purchasing policy requires documentation
when competition is not obtained, and University
procedure requires UNC- G legal counsel to review
all outside contracts before they are signed by the
appropriate University employee. Auditors recom-mended
tightening the University’s internal con-trols
and maintaining appropriate documentation.
Th e review also revealed that over $ 65,000 of
Annual Report 2008 | Investigative Division
Th e review also found that
the Director submitted a
fi ctitious hotel receipt for
reimbursement of $ 1,646.87,
allowed ineligible family
members of staff to attend
retreats at a cost of $ 7,668.33,
and gave special benefi ts to
family members through the
EOC program.
20 Increasing Effi ciency... Exposing Fraud
the ITS contract costs related to the contractor’s
commutes from Los Angeles and Las Vegas and
that UNC- G provided excessive reimbursements
for the contractor’s meals including two purchas-es
of alcoholic beverages,
which is prohibited by State
policy. Further, $ 212,000 of
the ITS contract was paid
with student fees. Auditors
recommended ensuring ex-penses
are reasonable and
necessary and that funds are
only used for their intended
purposes.
North Carolina
Department of
State Treasurer
Th e Offi ce of the State
Auditor received a written
request from the Lieutenant
Governor’s General Coun-sel
regarding the possible
misuse of state computers
within the Department of State Treasurer ( State
Treasurer) for political purposes. Allegedly, a pri-vate
citizen used a state computer to send a pub-lic
records request to conduct political campaign
opposition research. Th e investigation confi rmed
that the Senior Advisor to the State Treasurer sent
the public records request through State Treasurer
computers via a private e- mail account belonging
to her father- in- law.
Analysis of State computers assigned to four
State Treasurer employees, who also work part-time
for the State Treasurer’s campaign for gover-nor,
revealed signifi cant evidence of political ac-tivity
using state resources. Auditors found these
employees accessed political websites belonging to
political action committees, polling consultants,
and the North Carolina Democratic Party’s on-line
voter database. In addi-tion,
our review discovered
53 political documents in-cluding
campaign speeches
and donor lists and ap-proximately
60 emails re-garding
campaign activity.
State law prohibits political
activity by State employees
while on duty or using State
resources. Auditors recom-mended
disciplinary action
against the four employees
and improved training for
all State Treasurer staff .
Offi ce of the Lieutenant
Governor
Th e State Treasurer’s
campaign manager sent a
letter to the State Auditor requesting an investiga-tion
into potential political operations within the
Offi ce of the Lieutenant Governor. Th e allegations
concerned state property, including computers,
being used for campaign activity and the use of
the North Carolina State Highway Patrol for trans-portation
to campaign events. Th e investigation
revealed that a private internet connection and
wireless internet router were installed in the Lieu-tenant
Governor’s offi ce in May 2005 for her em-ployees’
personal use. Th e Lieutenant Governor’s
campaign committee paid for the equipment and
internet service.
North Carolina Office of the State Auditor
Analysis of State computers
assigned to four State
Treasurer employees, who
also work part- time for the
State Treasurer’s campaign for
governor, revealed signifi cant
evidence of political activity
using state resources.
Increasing Effi ciency... Exposing Fraud 2
Auditors discovered a lack of policies govern-ing
the use of personal computers and inadequate
monitoring of computer and router use. In ad-dition,
the review found that there are no North
Carolina General Statutes, rules, or regulations
that specifi cally address the security protection
provided the Lieutenant Governor. Auditors
recommended the removal of the private inter-net
access, communication of policies regarding
personal use of computers, and the issuance of an
executive order by the Governor that formally au-thorized
the security protection for the Lieutenant
Governor.
Department of Public Instruction / State
Board of Education
Th e Offi ce of the State Auditor received a com-plaint
through the State Auditor’s Hotline con-cerning
the arrangement that allowed the Chair-man
of the State Board of Education ( State Board)
to rent a car to use while conducting State Board
business. Th e investigation revealed that the rent-al
car arrangement was not the most economical
option. Investigators calculated that leasing the
same vehicle rather than renting it on a monthly
basis would have resulted in a savings of approxi-mately
$ 0.39 per mile or $ 26,445 in total. Further,
the review found that the Chairman was eligible
to drive a state vehicle. Analysis of costs associ-ated
with the assignment of a state vehicle indi-cated
that cost savings of $ 32,695 could have been
achieved. Auditors recommended that alternative
options be pursued and that management monitor
the costs of each option.
Th e investigation also revealed that $ 9,523
related to meals expense was improperly paid
to the State Board Chairman. Auditors recom-mended
the clarifi cation of policies regarding the
reimbursement of expenses for board members
and that the State Board seek re- payment of the
improper meals expenses. Aft er receiving the
draft report, the State Board Chairman repaid the
Department of Public Instruction for meals for
which he was improperly reimbursed.
Annual Report 2008 | Investigative Division
22 Increasing Effi ciency... Exposing Fraud
Performance Audit Division
T he Offi ce of the State Auditor’s
Performance Audit Division is designed
to allow for fl exible deployment of
resources while upholding strict auditing standards.
Unlike prescheduled fi nancial audits, the subjects
of performance audits are chosen at the discretion
of the State Auditor upon
consideration of two
factors: greatest risk
potential and greatest
opportunity for impact.
Upon release, performance
audits provide the public,
agency managers and
program managers with
an objective analysis of
whether State agencies
effi ciently and eff ectively
manage their programs and
activities. Furthermore,
these audits are of particular
value to legislators who must
consider the eff ectiveness
of State programs in funding decisions and to the
taxpayers who pay for those programs.
Th e Performance Audit Division was recognized
by the National State Auditors Association for best
2008 performance audit less than 2000 hours. Th e
audit entitled Internal Auditing in North Carolina
Agencies and Institutions is an example of the
valuable contribution the Performance Audit
Division makes to the Offi ce of the State Auditor
and State government in general.
During 2008, the State Auditor’s Performance
Audit Division continued to produce reports that
are narrow in scope and target specifi c programs
or areas where the State is at greatest risk. Training
for the Division’s auditors and staff focused
on performance- based management, business
process improvement, and contract management.
Training sessions instructed
auditors how to evaluate
the relationship between
program results and the
resources used to achieve
those results, how to
identify opportunities to
make government operate
more effi ciently, and
how to identify contract
management practices that
do not protect the interests of
the State. Th e Performance
Audit Division continues
to concentrate on value-added
and proactive audits
that strengthen the State
Auditor’s watchdog function in State government.
Th e following are summaries of the more notable
cases in Fiscal Year 2007- 2008. A complete list of
Performance Audit Division audits ( prefi x PER) is
detailed in Appendix A.
North Carolina Education Lottery
Th e audit objectives were to determine whether
the North Carolina Education Lottery ( NCEL) uses
performance management best practices, whether
NCEL management compensation is comparable
Th e Performance Audit
Division was recognized
by the National State
Auditors Association for
best 2008 performance
audit less than 2000
hours.
North Carolina Office of the State Auditor
Increasing Effi ciency... Exposing Fraud 2
to lotteries in other states, and whether NCEL
employee and vendor ethnic diversity refl ects
the ethnic diversity of North Carolina’s general
population.
Th e audit found that NCEL suff ers from
four performance management weaknesses: no
documented revenue forecasting methodology;
no formal strategic plan; no ongoing marketing or
operational research; and no full- cost accounting
of promotional events. Th e audit also found
that NCEL management compensation is in line
with lottery management
compensation of bordering
states, and the ethnic
diversity of NCEL
management and staff
is similar to that of
North Carolina’s general
population.
Albemarle Mental
Health Center
Th e audit objective was
to determine whether the
resources provided by
the State were used for
their intended purpose
in a prudent business manner and with proper
oversight.
Th e audit found that the Area Program Director’s
$ 282,663 base salary and the Special Assistant’s
$ 142,848 base salary were excessive. Th e audit also
found that the Center’s Board member expenses
were excessive, and the Board did not monitor
operations and ensure public funds were used in
the most eff ective and effi cient manner to fulfi ll
the Center’s mission.
Academically or Intellectually Gifted
Program
Th e audit objective was to determine whether the
Exceptional Children Division of the Department
of Public Instruction ( DPI) adequately monitors
the use of state funding for the Academically or
Intellectually Gift ed ( AIG) Program.
Th e audit found that the AIG Program was not
monitored at the state level to ensure that local
programs are operated according to documented
plans. Also, DPI did not
monitor local AIG program
expenditures or determine
the quality and eff ectiveness
of local programs.
Department of
Transportation
Highway Project
Schedules And Costs
Th e audit objective was
to determine the extent
to which Transportation
Improvement Program
highway projects are having
schedule delays and cost
increases and the major
categories contributing to these problems.
Th e audit found that the Department of
Transportation ( DOT) did not successfully meet
planned construction schedules, resulting in
$ 152.4 million of additional infl ation related
construction costs. Th e audit also found that DOT
was defi cient in key performance management
control activities and does not have meaningful
and reliable highway performance objectives and
measures.
Th e audit found that the
Area Program Director’s
$ 282,663 base salary and
the Special Assistant’s
$ 142,848 base salary
were excessive.
Annual Report 2008 | Performance Audit Division
24 Increasing Efficiency... Exposing Fraud
Department of Juvenile Justice And
Delinquency Prevention – Juvenile Crime
Prevention Council- funded Programs
The audit objectives were to determine whether
Juvenile Crime Prevention Council ( JCPC) mem-bers
have conflicts of interest, whether JCPC-funded
programs were adequately monitored,
and whether reliable data was available to evaluate
JCPC program effectiveness.
The audit found that some JCPC members ap-pear
to have financial and program evaluation
conflicts of interest between their duty as a council
member to fairly select programs to fund and their
interest as a program manager to maximize fund-ing
for the programs they manage. The audit also
found that the Department of Juvenile Justice and
Delinquency Prevention and County JCPCs did
not adequately monitor JCPC- funded programs,
some JCPC program participation data was inac-curate,
and there were no standardized measurable
performance objectives for each program type.
Department of Health And Human Services
Division of Medical Assistance
The audit objectives were to determine whether
Division of Medical Assistance ( DMA) properly
developed and managed the utilization review
contract for mental health services, and whether
proper protocols were established to ensure that
the authorizations for services were managed
effectively.
The audit found: DMA management disabled
critical controls designed to prevent unauthorized
payments; DMA’s plan for administering
the contract was inadequately documented;
improvement was needed in DMA’s contract
monitoring processes; and DMA may have
overpaid for services under the contract due to not
resolving a settlement agreement.
Department of Environment And Natural
Resources – Division of Air Quality
The objective of the audit was to determine
whether the Division of Air Quality ( DAQ) Title
V air quality permit review process could be more
efficient.
The audit found that by implementing “ LEAN,” a
process improvement technique modeled after the
Toyota Production System, DAQ could increase
the number of air quality permit applications
processed by 52%, thus causing applicants to
receive permits approximately 40% sooner. This
efficiency increase should effectively eliminate the
current backlog of 229 air quality permits by 2009,
as opposed to 2015 using the current process.
DAQ could see an efficiency gain of $ 572,000, the
cost of hiring seven new full- time staff.
North Carolina Office of the State Auditor
Increasing Efficiency... Exposing Fraud 25
T he Information Systems ( IS) Audit
Division’s responsibilities include
analyzing State agency computer
systems to ensure that they are properly secured,
produce accurate financial reports and comply
with State regulations. Staff in this division
conduct their own audits of computer systems
across the State. In addition, they provide IS audit
assistance to financial audit teams to ensure that
agency computerized accounting systems can be
relied upon to produce accurate financial reports.
Without those assurances, financial audit teams
would be unable to issue unqualified opinions on
the accuracy of agency financial statements.
IS auditors are in a unique position to think pro
actively about discovering suspicious data trends
flowing from an agency’s information systems.
The State Auditor’s goal for Fiscal Year 2007-
2008 was to continue the collaboration between
IS auditors and the Financial and Investigative
audit teams and to increase proactive auditing by
providing computer forensic assistance and data
mining analyses of agency financial data.
The IS Audit Division continues to perform
Strategic Audit Reviews that are issued separately
from IS audits. These reviews are used to uncover
fraud, waste or abuse of taxpayer resources by
following suspicious State agency data trends.
While initiated and coordinated by the IS Audit
Division, these reviews involve auditors from all
divisions of the Office of the State Auditor.
Strategic Audit Reviews build a bridge from an
abstract proactive policy to the actual practice of
being proactive. By conducting Strategic Audit
Reviews through the use of data mining analysis,
the State Auditor’s office is in the forefront of
auditing trends. To improve innovation and
effectiveness, the State Auditor continues to work
with leading experts in data mining and plans to
continue to increase the number of Strategic Audit
Reviews to bring more accountability to State
government.
In Fiscal Year 2008- 2009, the IS Audit Division
is implementing an upgrade to the Office of
the State Auditor’s existing audit software. This
software will allow easier access to auditee data
by auditors in other sections of the office and will
allow the use of a built in “ Extract, Transmit, and
Load” ( ETL) technology that will expedite the
acquisition of agency data to be used by Financial
auditors in financial audits and by IS auditors in
their strategic reviews.
The following is a summary of IS Audit
Division’s audits and reviews conducted during
Fiscal Year 2007- 2008. A complete list of IS Audit
Division’s audits and reviews ( prefixes ISA and
SAR) is detailed in Appendix A.
Strategic Audit Review: North Carolina
Division of Social Services
The purpose of this Strategic Audit Review was
to identify invalid Social Security Numbers ( SSNs)
Information Systems Audit
Division
Annual Report 2008 | Information Systems Audit Division
26 Increasing Efficiency... Exposing Fraud
in the North Carolina Division of Social Services.
This review found 1,906 SSNs that were invalid.
The review also found 1,237 SSNs that belonged
to the deceased person’s category on the Social
Security Administration’s Death File. Finally,
the review found 69 food stamp recipients with a
certification date equal to or greater than 45 days
after their date of death.
Strategic Audit Review: North Carolina
State University
The purpose of this Strategic Audit Review was
to identify improper use of procurement cards
( P- Cards) by University employees. This review
found that two University employees used their P-Cards
for personal use. The University had taken
appropriate action on these employees by the time
of our audit.
IS Audit: Community Colleges – General
Controls Reviews
IS Audit staff conducted Information System
audits at the following Community Colleges:
Edgecombe Community College, Blue Ridge
Community College, Wilson Technical Community
College, Rowan- Cabarrus Community College,
Halifax Community College, Piedmont
Community College, Gaston Community College,
Cleveland Community College, Guilford Technical
Community College, Randolph Community
College, Robeson Community College, Catawba
Valley Community College, Central Carolina
Community College, Stanly Community College,
Roanoke- Chowan Community College, Johnston
Community College, Asheville- Buncombe
Community College, Carteret Community College,
James Sprunt Community College, Haywood
Community College, Bladen Community
College, Martin Community College, Brunswick
Community College, McDowell Technical
Community College, Pamlico Community
College, Wilkes Community College, Richmond
Community College, Surry Community College,
Mayland Community College, Fayetteville
Technical Community College, and Wake
Technical Community College.
The primary objective of these audits was to
evaluate the colleges’ IS general controls. The
scope included general security, access controls,
systems software, physical security, and disaster
recovery. Weaknesses noted in access controls
were conveyed to management in a private letter
because of the sensitive nature of the findings,
while the weaknesses that we noted in general
security, systems software, physical security, and
disaster recovery are noted in individual public
reports for each college available to the public on
the State Auditor’s website ( www. ncauditor. net).
IS Audit: North Carolina Information
Technology Services – General Controls
Review
IS audit staff audited North Carolina Information
Technology Services ( ITS). The primary objective
of this audit was to follow- up on the findings
noted in the prior year’s general controls review.
IS audit staff also performed a limited information
systems audit of the application controls for the
ITS MICS Billing System and a review of the ITS
Service Level Agreement process. We found that
ITS was not meeting their targeted resolution time
and target percentage of calls resolved on- time as
stated in the signed Service Level Agreements.
North Carolina Office of the State Auditor
Increasing Effi ciency... Exposing Fraud 2
IS Audit: North Carolina Department of
Health And Human Services – Application
Controls Review
IS audit staff conducted an application
controls review of the County Administration
Reimbursement System at the North Carolina
Department of Health and Human Services. Th e
scope of the audit included
data completeness,
data accuracy, table
maintenance, user access,
processing, and data
backup and recovery. We
did not note any signifi cant
weaknesses in this
application.
IS Audit: North
Carolina Department
of Transportation
– Application Controls
Review
IS audit staff conducted
an application controls review of the Federal
Highway Billing System at the North Carolina
Department of Transportation. Th e scope of the
audit included data completeness, data accuracy,
table maintenance, user access, processing, and
data backup and recovery. We did not note any
signifi cant weaknesses in this application.
IS Audit: North Carolina Department of
Health And Human Services, Division of
Social Services – Application Controls
Review
IS audit staff conducted an application controls
review of the Food Stamps Information Systems
( FSIS) at the North Carolina Department of Health
and Human Services, Division of Social Services.
Th e scope of the audit included data completeness,
data accuracy, data validity, and data authorization.
In the data completeness area we noted that a
SAS 70 Report was not available for a third party
vendor. In the data accuracy area we noted that
there was a lack of program
change controls and a lack
of program run books,
programmer’s manual, and
restart procedures. In the
data validity area we noted
that there was a lack of
segregation of duties in the
recording and approval of
applications through the
FSIS system. In the data
authorization area we noted
that there was information
leakage on the internet
webpage, an inadequate
review of UAudit and
excessive activity reports, and a lack of source
code comparison.
IS Audit: North Carolina Department of
Health And Human Services, Division of
Social Services – Application Controls
Review
IS audit staff conducted an application controls
review of the Eligibility Information Systems ( EIS)
at the North Carolina Department of Health and
Human Services, Division of Social Services. Th e
scope of the audit included data completeness, data
accuracy, data validity, and data authorization. In
the data accuracy area we noted that a budget
e review found 69 food
stamp recipients with a
certi cation date equal to
or greater than 45 days
a er their date of death.
Annual Report 2008 | Information Systems Audit Division
28 Increasing Efficiency... Exposing Fraud
calculation was performed outside of the EIS
application, there was a lack of review of the error
and attention report, there was a lack of program
change controls and a lack of program run books,
programmer’s manual, and restart procedures. In
the data validity area we noted that there was a
lack of segregation of duties in the recording and
approval of applications through the EIS system. In
the data authorization area we noted that there was
information leakage on the internet webpage, an
inadequate review of UAudit and excessive activity
reports, and a lack of source code comparison.
Information Security Vulnerability
Assessments
Funded by lapsed salaries, the Office of the
State Auditor contracted with a private firm to
conduct vulnerability assessments on the North
Carolina Department of Corrections, the North
Carolina Department of Environment and Natural
Resources, and the North Carolina Department
of Public Instruction. The purpose of these
assessments were to gauge the entity’s security
posture at a given point in time, identify security
risks that might make an entity vulnerable to
attack, and determine appropriate procedures to
mitigate the identified risks. The detailed results
of the assessments are kept confidential as to
not announce control weaknesses to would- be
intruders. General results containing the numbers
of high, medium and low weaknesses are released
to the public through the State Auditor’s website
and email notification service.
North Carolina Office of the State Auditor
Office of the state audi tor main office and branc h loca tions
Morganton
Asheville
Charlotte
Fayetteville
Wilmington
Greenville
Edenton
Raleigh
Winston- Salem Greensboro
Increasing Efficiency... Exposing Fraud 29
Personnel
To be a proactive State agency, the Office of the
State Auditor must be a responsible manager of
its personnel. After selecting the best qualified
applicants, the State Auditor’s Office must then
provide quality training to employees and a quality
control review of employees work product.
The Office of the State Auditor continues to work
towards the goal of more effective and efficient audits.
These efficiency gains allow the State Auditor’s Office
to spread out its resources to do more with current
auditor and staff positions.
The follow- up to the 2006 AuditWatch efficiency
curriculum was completed in 2007. Efficiency
levels were analyzed and AuditWatch provided the
State Auditor with feedback in areas that needed
improvement. In 2005, the Office of the State Auditor
used 103,703 audit hours in the Financial Audit
Division alone. After the AuditWatch efficiencies
were in place, the Financial Audit Division used only
87,358 audit hours. This equates to a total efficiency
gain of 15,980 audit hours or $ 1,358,300 ( audit hours
x billing rate).
Recruiting
The State Auditor’s goal is to build relationships with
the right applicants. This will reduce turnover and
eliminate the waste that frequent turnover creates.
The Office of the State Auditor continues its efforts
to hire talented, skilled staff by recruiting on university
campuses across the state. We work with campus
faculty to participate in Beta Alpha Psi meetings,
accounting classes and other events. Significant
effort is made to identify applicants who want to be
challenged yet are looking for a good work- life balance
and want to make an impact as a public servant.
In addition, the State Auditor’s Office has made
great strides in its internship program. Internships
provide individuals an opportunity to perform
meaningful, career- related work with our Agency
prior to their final year in school. If the internship is
successful, the intern may be invited to begin their
career in the State Auditor’s Office. This program
has enabled the State Auditor to hire very talented
individuals who are looking for a long- term
relationship with our office.
Training
In Fiscal Year 2007- 2008, the State Auditor
refined the annual training standard from 65
hours to closer to the CPA Board requirement of
40 hours annually per person. This action saved
taxpayers over 2000 work hours that are now used
for audits, and resulted in the Training Department’s
restructuring. What once required four full- time
staff positions totaling $ 230,741 in Fiscal Year 2006-
2007, now takes one full- time professional in Fiscal
Year 2008- 2009.
In 2008, the State Auditor’s Office became an
authorized continuing professional education ( CPE)
sponsor recognized by the NC State Board of CPA
Examiners. This is part of the ongoing commitment
by the State Auditor to conduct quality continuing
education. The Agency has streamlined the training
process to better focus training in needed areas while
maintaining the flexibility to respond and react to
specific needs. In addition, training competencies
now allow for training needs and also for maximum
audit productivity in line with industry standards.
Quality Controls
The Office of the State Auditor’s work product
is governed by strict adherence to professional
standards promulgated by government agencies
General Administration
Annual Report 2008 | General Administrtion
30 Increasing Efficiency... Exposing Fraud
and professional organizations including the
Governmental Accounting Standards Board, the
Financial Accounting Standards Board, the Federal
Office of Management and Budget, the Government
Accountability Office, the American Institute of
Certified Public Accountants, and various state and
federal laws and regulations. These standards require
that auditors remain independent, be technically
proficient and receive continuing professional
education, obtain sufficient appropriate evidence to
support conclusions, and issue reports that clearly
communicate audit results.
The State Auditor’s Office has a control system
to ensure the quality of audit work. The system
includes supervisory review of all work product and
management review of audit reports and critical
supporting workpapers. The Agency monitors the
effectiveness of its quality control system by having
staff who did not participate in an audit periodically
review the work. To uphold the standards of the
supervisory review, the State Auditor’s goal is that
all newly hired Supervisor level employees and
above in the Financial Audit Division have a valid
CPA license, or the merit- based equivalent in work
experience.
In another layer of review, the Agency receives a
peer review every three years under the direction
of the National State Auditors Association. During
the peer review, members of audit staffs from other
states review the office’s quality control system and
workpapers for compliance with auditing standards.
The most recent peer review was performed in July
2006 and resulted in a clean opinion on the quality
control system.
Processing & Publication
With close to 200 employees in the Office of
the State Auditor, the publishing of audits, reports
and reviews is a complicated and time consuming
process. Magnified by the sensitive nature of the audit
subject matter, the Agency’s administrative staff must
be detail minded and highly organized. The goals of
accuracy and timeliness are the staff’s top priorities.
However without effective publication, the audit,
report or review would go unnoticed.
Publication of the audits, reports and reviews
is an essential part of Agency’s proactive posture.
A report exposing an instance of fraud, waste or
abuse of taxpayers’ resources, if publicized by the
statewide news media, becomes an effective tool
for the deterrence of future fraud, waste or abuse
of taxpayers’ resources. The State Auditor’s Office,
through a positive relationship with the news media,
can pro actively deter others from committing similar
acts of fraud, waste and abuse of taxpayer money.
Budgeting & Purchasing
The Office of the State Auditor is the taxpayers’
watchdog against wasteful spending of State
resources. To be an effective messenger, the Agency
must ensure that its resources are spent as wisely as
possible.
The State Auditor’s budget is approximately $ 18.9
million and the agency bills approximately $ 5.2
million for federal audit work. In addition to the
central office in Raleigh, the Agency has 9 branch
offices throughout the State which our budget office
is responsible for managing financially.
Budgeting and purchasing are governed by strict
rules and regulations. An independent CPA firm
annually conducts a financial audit of the office
and routinely issues a clean opinion of its financial
statements.
Management Information Systems ( MIS)
The Management Information Systems Division
( MIS) of the Office of the State Auditor is charged
with four primary objectives:
North Carolina Office of the State Auditor
Increasing Efficiency... Exposing Fraud 31
• Provide Information Technology services
including Operational Support, Application
Development, Infrastructure Management and
Information Security to Agency Personnel
• Oversight of Senate Bill 991 compliance
• Enterprise Information Technology strategic
planning for the Agency
• Information Technology tactical implementation
in order to increase productivity, efficiency and
security of critical business functions.
In addition to providing for the daily operational
support for Agency personnel, the MIS Division
completed a number of major projects to enhance
the efficiency, quality of service, and security of the
Agency.
MIS worked closely with the Office of the State
Controller to ensure the Agency met all technical
requirements for the Beacon Project ( statewide
payroll application implemented in March 2008).
MIS also worked with ITS and the Enterprise Data
Warehouse service, as the first customer of the
new Statewide Enterprise level service, to complete
the Management Services and Nongovernmental
Compliance Division’s Grants Compliance online
application ( GIC).
MIS has completed an internal upgrade of the
Agency Intranet, completing a change over from
a dynamic site to an industry standard portal
technology site designed to encourage collaboration
among personnel and to enable a more efficient
workflow during audits. In 2008, MIS has been
applying portal technology to reduce administrative
paperwork by developing on- line forms, workflow,
and email alerts. In conjunction with the portal
upgrade, MIS piloted an e- Learning initiative to
make training more efficient and cost effective.
In addition, MIS has upgraded the Agencies
network infrastructure to meet ESAP requirements.
MIS will continue to work closely with ITS
to securely merge the State Auditor’s network
infrastructure into the State of North Carolina’s
architecture. The Agency servers and software have
been upgraded to the latest versions. Finally, the
Business Continuity Plan ( BCP) / Continuation of
Operations Plan ( COOP) was reviewed and tested
to meet State requirements and to address Pandemic
Influenza planning requirements.
In 2009, the MIS Division will continue to provide
quality operational support to Agency personnel.
In addition, the MIS Division will aggressively work
to provide technologies to Agency personnel that
will improve the efficiency and quality of Agency
critical business functions. MIS will continue
to work with the Beacon Project Team to help
develop guidelines and requirements for additional
Beacon initiatives including the SAP Grants
module implementation. The GIC application for
the Management Services and Nongovernmental
Compliance Division will be enhanced to improve
both usability and functionality. Agency personnel
will complete comprehensive training on the new
internal portal. The e- Learning system will be
expanded to incorporate an advanced Learning
Management System solution. This will lead to
expanded education and training opportunities
including the ability to make vital information
available via web casting. In addition, an Agency
wide e- Recruiting solution will be designed and
implemented to assist in the recruitment and hiring
of quality candidates for open Agency positions.
An improved Intrusion Prevention System ( IPS)
will be installed and configured and infrastructure
and security needs will continue to be assessed and
improved where feasible. Finally, the Agency has
been scheduled for ITS consolidation in 2009 and
MIS will work with ITS to ensure that required IT
services are smoothly transitioned to ITS while
maintaining the operational functionality required
for the Office of the State Auditor to perform its
mission.
Annual Report 2008 | General Administrtion
32 Increasing Efficiency... Exposing Fraud
Appendix A
The following reports are listed by report number which correspond to individual agency divisions. These
reports were issued from July 1, 2007 through September 2008.
Report Number Report Title Release Date
FCA- 2007- 2109 Brunswick County Clerk of Superior Court - Fiscal Control Audit 9/ 26/ 07
FCA- 2007- 2126 Currituck County Clerk of Superior Court - Fiscal Control Audit 1/ 29/ 08
FCA- 2007- 2127 Dare County Clerk of Superior Court - Fiscal Control Audit 7/ 10/ 07
FCA- 2007- 2137 Graham County Clerk of Superior Court - Fiscal Control Audit 6/ 29/ 07
FCA- 2007- 2141 Halifax County Clerk of Superior Court - Fiscal Control Audit 11/ 6/ 07
FCA- 2007- 2157 Martin County Clerk of Superior Court - Fiscal Control Audit 9/ 12/ 07
FCA- 2007- 2178 Rockingham County Clerk of Superior Court - Fiscal Control Audit 9/ 25/ 07
FCA- 2007- 2186 Swain County Clerk of Superior Court - Fiscal Control Audit 11/ 26/ 07
FCA- 2007- 2193 Washington County Clerk of Superior Court - Fiscal Control Audit 10/ 12/ 07
FCA- 2008- 2106 Beaufort County Clerk of Superior Court - Fiscal Control Audit 1/ 29/ 08
FCA- 2008- 2132 Edgecombe County Clerk of Superior Court - Fiscal Control Audit 2/ 27/ 08
FCA- 2008- 2151 Jones County Clerk of Superior Court - Fiscal Control Audit 9/ 11/ 08
FCA- 2008- 2171 Perquimans County Clerk of Superior Court - Fiscal Control Audit 1/ 7/ 08
FCA- 2009- 2101 Alexander County Clerk of Superior Court - Fiscal Control Audit 9/ 15/ 08
FCA- 2009- 2111 Burke County Clerk of Superior Court - Fiscal Control Audit 9/ 15/ 08
FCA- 2009- 2149 Jackson County Clerk of Superior Court - Fiscal Control Audit 9/ 17/ 08
FIN- 2006- 6070 North Carolina Agricultural and Technical State University -
Financial Statement Audit 8/ 23/ 07
FIN- 2006- 6086 Elizabeth City State University - Financial Statement Audit 9/ 14/ 07
FIN- 2006- 6088 Fayetteville State University - Financial Statement Audit 12/ 10/ 07
FIN- 2006- 6090 North Carolina Central University - Financial Statement Audit 8/ 17/ 07
FIN- 2006- 6801 South Piedmont Community College - Financial Statement Audit 11/ 14/ 07
FIN- 2006- 6807 Brunswick Community College - Financial Statement Audit 8/ 7/ 07
FIN- 2006- 6822 College of The Albemarle - Financial Statement Audit 7/ 27/ 07
FIN- 2006- 6876 Sampson Community College - Financial Statement Audit 7/ 12/ 07
FIN- 2006- 6878 Sandhills Community College - Financial Statement Audit 8/ 7/ 07
FIN- 2007- 3400 Department of State Treasurer - Statewide Financial Audit Procedures 2/ 5/ 08
FIN- 2007- 3510 Department of Public Instruction - Statewide Financial Audit Procedures 3/ 14/ 08
FIN- 2007- 3700 Department of Agriculture and Consumer Services -
Statewide Financial Audit Procedures 4/ 2/ 08
FIN- 2007- 4160 Office of the State Controller - Statewide Financial Audit Procedures 2/ 1/ 08
FIN- 2007- 4200 Department of Transportation - Statewide Financial Audit Procedures 4/ 2/ 08
FIN- 2007- 4205 North Carolina Turnpike Authority - Financial Statement Audit 5/ 30/ 08
North Carolina Office of the State Auditor
Increasing Efficiency... Exposing Fraud 33
FIN- 2007- 4300 Department of Environment and Natural Resources -
Statewide Financial Audit Procedures 2/ 5/ 08
FIN- 2007- 4410 North Carolina Department of Health and Human Services -
Statewide Financial Audit Procedures 4/ 3/ 08
FIN- 2007- 4600 Department of Commerce - Statewide Financial Audit Procedures 3/ 10/ 08
FIN- 2007- 4620 North Carolina State Ports Authority - Financial Statement Audit 4/ 16/ 08
FIN- 2007- 4650 Employment Security Commission - Statewide Financial Audit Procedures 4/ 2/ 08
FIN- 2007- 4670 North Carolina Education Lottery - Financial Statement Audit 12/ 6/ 07
FIN- 2007- 4700 Department of Revenue - Statewide Financial Audit Procedures 2/ 4/ 08
FIN- 2007- 4900 North Carolina Department of Crime Control and Public Safety -
Statewide Financial Audit Procedures 3/ 27/ 08
FIN- 2007- 6020 University of North Carolina at Chapel Hill - Financial Statement Audit 3/ 25/ 08
FIN- 2007- 6030 North Carolina State University - Financial Statement Audit 2/ 1/ 08
FIN- 2007- 6040 The University of North Carolina at Greensboro - Financial Statement Audit 1/ 29/ 08
FIN- 2007- 6050 University of North Carolina at Charlotte - Financial Statement Audit 2/ 5/ 08
FIN- 2007- 6055 The University of North Carolina at Asheville - Financial Statement Audit 5/ 28/ 08
FIN- 2007- 6060 University of North Carolina Wilmington - Financial Statement Audit 2/ 20/ 08
FIN- 2007- 6065 East Carolina University - Financial Statement Audit 3/ 12/ 08
FIN- 2007- 6070 North Carolina Agricultural and Technical State University -
Financial Statement Audit 5/ 30/ 08
FIN- 2007- 6075 Western Carolina University - Financial Statement Audit 5/ 9/ 08
FIN- 2007- 6080 Appalachian State University - Financial Statement Audit 1/ 2/ 08
FIN- 2007- 6082 The University of North Carolina at Pembroke - Financial Statement Audit 6/ 2/ 08
FIN- 2007- 6084 Winston- Salem State University - Financial Statement Audit 4/ 3/ 08
FIN- 2007- 6086 Elizabeth City State University - Financial Statement Audit 7/ 2/ 08
FIN- 2007- 6088 Fayetteville State University - Financial Statement Audit 5/ 30/ 08
FIN- 2007- 6090 North Carolina Central University - Financial Statement Audit 7/ 15/ 08
FIN- 2007- 6092 North Carolina School of the Arts - Financial Statement Audit 5/ 1/ 08
FIN- 2007- 6095 University of North Carolina Hospitals - Financial Statement Audit 11/ 14/ 07
FIN- 2007- 6801 South Piedmont Community College - Financial Statement Audit 5/ 21/ 08
FIN- 2007- 6802 Asheville Buncombe Technical Community College - Financial Statement Audit 5/ 28/ 08
FIN- 2007- 6804 Beaufort County Community College - Financial Statement Audit 3/ 7/ 08
FIN- 2007- 6807 Brunswick Community College - Financial Statement Audit 5/ 20/ 08
FIN- 2007- 6810 Cape Fear Community College - Financial Statement Audit 5/ 14/ 08
FIN- 2007- 6812 Carteret Community College - Financial Statement Audit 5/ 9/ 08
FIN- 2007- 6814 Catawba Valley Community College - Financial Statement Audit 4/ 14/ 08
FIN- 2007- 6820 Cleveland Community College - Financial Statement Audit 5/ 28/ 08
FIN- 2007- 6830 Edgecombe Community College - Financial Statement Audit 4/ 2/ 08
FIN- 2007- 6832 Fayetteville Technical Community College - Financial Statement Audit 6/ 13/ 08
Annual Report 2008 | Appendix A
34 Increasing Efficiency... Exposing Fraud
FIN- 2007- 6836 Gaston College - Financial Statement Audit 5/ 30/ 08
FIN- 2007- 6838 Guilford Technical Community College - Financial Statement Audit 5/ 21/ 08
FIN- 2007- 6842 Haywood Community College - Financial Statement Audit 3/ 14/ 08
FIN- 2007- 6843 Blue Ridge Community College - Financial Statement Audit 3/ 19/ 08
FIN- 2007- 6846 James Sprunt Community College - Financial Statement Audit 2/ 21/ 08
FIN- 2007- 6847 Johnston Community College - Financial Statement Audit 6/ 9/ 08
FIN- 2007- 6850 Martin Community College - Financial Statement Audit 3/ 14/ 08
FIN- 2007- 6851 Mayland Community College - Financial Statement Audit 5/ 22/ 08
FIN- 2007- 6852 McDowell Technical Community College - Financial Statement Audit 3/ 14/ 08
FIN- 2007- 6853 Mitchell Community College - Financial Statement Audit 3/ 12/ 08
FIN- 2007- 6854 Montgomery Community College - Financial Statement Audit 5/ 22/ 08
FIN- 2007- 6860 Pamlico Community College - Financial Statement Audit 5/ 9/ 08
FIN- 2007- 6861 Piedmont Community College - Financial Statement Audit 5/ 20/ 08
FIN- 2007- 6866 Richmond Community College - Financial Statement Audit 5/ 30/ 08
FIN- 2007- 6874 Rowan- Cabarrus Community College - Financial Statement Audit 5/ 20/ 08
FIN- 2007- 6880 Southeastern Community College - Financial Statement Audit 5/ 14/ 08
FIN- 2007- 6882 Southwestern Community College - Financial Statement Audit 5/ 28/ 08
FIN- 2007- 6883 Stanly Community College - Financial Statement Audit 5/ 21/ 08
FIN- 2007- 6884 Surry Community College - Financial Statement Audit 5/ 21/ 08
FIN- 2007- 6890 Wake Technical Community College - Financial Statement Audit 5/ 28/ 08
FIN- 2007- 6896 Wilkes Community College - Financial Statement Audit 5/ 22/ 08
FIN- 2007- 6898 Wilson Technical Community College - Financial Statement Audit 5/ 28/ 08
FIN- 2007- 8303 USS North Carolina Battleship Commission - Financial Statement Audit 5/ 28/ 08
FIN- 2007- 8410 NC Teachers and State Employees Comprehensive Major Medical Plan 1/ 29/ 08
FIN- 2007- 8530 North Carolina Global Transpark Authority 1/ 2/ 08
FIN- 2007- 8550 North Carolina Agricultural Finance Authority 5/ 14/ 08
FIN- 2007- 8560 Wireless Emergency Telephone System Fund - Financial Statement Audit 5/ 29/ 08
FIN- 2007- 8730 Statewide Single Audit 4/ 8/ 08
GRA- 2007- 0014 Review of North Carolina Fair Housing Center State Grant 7/ 20/ 07
GRA- 2007- 0028 Review of Carolyns Little Castle State Grant 9/ 13/ 07
GRA- 2007- 0031 Review of The Kids Place Day Care State Grant 8/ 22/ 07
GRA- 2007- 0032 Review of United Community Ministries State Grant 7/ 16/ 07
GRA- 2007- 0033 Review of Wayne Memorial Hospital State Grant 7/ 19/ 07
GRA- 2007- 0037 Review of East Spencer New Beginning Community Development State Grant 11/ 29/ 07
GRA- 2007- 0038 Review of Operation Sickle Cell Inc. State Grant 2/ 18/ 08
GRA- 2008- 0039 Review of Teaching Academics for Life Learning Outreach Ministries State Grant 9/ 13/ 07
GRA- 2008- 0040 Review of Wee Care Inc. State Grant 2/ 1/ 08
GRA- 2008- 0041 Review of Primary Colors Day Care Center State Grant 11/ 13/ 07
North Carolina Office of the State Auditor
Increasing Efficiency... Exposing Fraud 35
GRA- 2008- 0042 Review of North Hills Child Care Center State Grant 9/ 13/ 07
GRA- 2008- 0043 Review of Hoke County Youth & Family Services Inc. State Grant 3/ 13/ 08
GRA- 2008- 0044 Review of Healthy Mothers Healthy Babies Coalition of Wake County State Grant 11/ 1/ 07
GRA- 2008- 0045 Review of Durham Nursery & Preschool State Grant 2/ 1/ 08
GRA- 2008- 0046 Review of Infants Palace Day Care Inc. State Grant 8/ 23/ 07
GRA- 2008- 0047 Review of JSL Development Center State Grant 11/ 14/ 07
GRA- 2008- 0048 Review of Appletree Day Care Inc. State Grant 8/ 30/ 07
GRA- 2008- 0049 Review of Life After Life Inc. State Grant 9/ 11/ 07
GRA- 2008- 0050 Review of the Boys and Girls Club of Wake County State Grant 4/ 25/ 08
GRA- 2008- 0051 Review of Mediation Services of Forsyth County State Grant 11/ 13/ 07
GRA- 2008- 0052 Review of Microenterprise Loan Program of Winston- Salem State Grant 3/ 3/ 08
GRA- 2008- 0053 Review of The Salvation Army Charlotte State Grant 9/ 17/ 07
GRA- 2008- 0054 Review of Sandhills Community Action Program Inc. State Grant 6/ 11/ 08
GRA- 2008- 0055 Review of Tar Heel Volunteer Rescue Squad State Grant 8/ 17/ 07
GRA- 2008- 0058 Review of Windows of the World CDC State Grant 11/ 13/ 07
GRA- 2008- 0060 Review of Stem Community Fire Department EMS State Grant 4/ 25/ 08
GRA- 2008- 0061 Review of The Enola Group Inc. State Grant 5/ 29/ 08
GRA- 2008- 0062 Review of Prevent Blindness North Carolina State Grant 7/ 28/ 08
GRA- 2008- 0065 Review of Martin County Community Action State Grant 9/ 4/ 08
GRA- 2008- 0068 Review of the North Carolina Pottery Center State Grant 7/ 17/ 08
INV- 2006- 0307F Follow- up to Tire Retread Contract 3/ 11/ 08
INV- 2007- 0318F University of North Carolina Hospitals/ University of North Carolina
School of Pharmacy - Follow- up 2/ 28/ 08
INV- 2007- 0319 University of North Carolina at Greensboro 7/ 11/ 07
INV- 2007- 0320 North Carolina Department of Transportation 8/ 28/ 07
INV- 2007- 0321 North Carolina Department of Administration 9/ 4/ 07
INV- 2007- 0322 East Carolina University 9/ 7/ 07
INV- 2007- 0323 North Carolina Department of Transportation 9/ 12/ 07
INV- 2007- 0324 North Carolina Department of Commerce 10/ 1/ 07
INV- 2007- 0325 North Carolina Department of Environment and Natural Resources 10/ 23/ 07
INV- 2007- 0326 Department of Public Instruction 11/ 27/ 07
INV- 2007- 0327 “ The Conflict Resolution Center, Inc.” 11/ 28/ 07
INV- 2008- 0328 Office of the Lieutenant Governor 1/ 31/ 08
INV- 2008- 0329 North Carolina Department of State Treasurer 1/ 31/ 08
INV- 2008- 0330 North Carolina Central University 2/ 12/ 08
INV- 2008- 0331 Piedmont Community College 3/ 24/ 08
INV- 2008- 0332 North Carolina Department of Health and Human Services 4/ 29/ 08
INV- 2008- 0333 North Carolina General Assembly 5/ 27/ 08
Annual Report 2008 | Appendix A
36 Increasing Efficiency... Exposing Fraud
INV- 2008- 0334 North Carolina State Board of Elections 5/ 13/ 08
INV- 2008- 0335 University of North Carolina at Greensboro 5/ 29/ 08
INV- 2008- 0336 North Carolina State University 6/ 17/ 08
INV- 2008- 0337 North Carolina Central University 6/ 17/ 08
INV- 2008- 0338 North Carolina Department of Health and Human Services 7/ 31/ 08
INV- 2008- 0339 Autism Society of North Carolina 8/ 21/ 08
INV- 2008- 0340 North Carolina State Ethics Commission 9/ 18/ 08
INV- 2008- 0341 Robeson Community College 9/ 23/ 08
ISA- 2007- 4300 North Carolina Department of Environment and Natural Resources 9/ 17/ 07
ISA- 2007- 4410 North Carolina Department of Health and Human Services/
County Administration Reimbursement System 9/ 7/ 07
ISA- 2007- 4500 North Carolina Department of Corrections 7/ 3/ 07
ISA- 2007- 4660 Information Technology Services 9/ 4/ 07
ISA- 2007- 6802 Asheville- Buncombe Technical Community College 10/ 22/ 07
ISA- 2007- 6806 Bladen Community College 11/ 30/ 07
ISA- 2007- 6807 Brunswick Community College 1/ 2/ 08
ISA- 2007- 6812 Carteret Community College 11/ 7/ 07
ISA- 2007- 6814 Catawba Valley Community College 9/ 14/ 07
ISA- 2007- 6816 Central Carolina Community College 9/ 18/ 07
ISA- 2007- 6820 Cleveland Community College 8/ 22/ 07
ISA- 2007- 6830 Edgecombe Community College 7/ 3/ 07
ISA- 2007- 6836 Gaston College 8/ 22/ 07
ISA- 2007- 6838 Guilford Technical Community College 9/ 7/ 07
ISA- 2007- 6840 Halifax Community College 7/ 20/ 07
ISA- 2007- 6842 Haywood Community College 11/ 29/ 07
ISA- 2007- 6843 Blue Ridge Community College 7/ 13/ 07
ISA- 2007- 6846 James Sprunt Community College 11/ 7/ 07
ISA- 2007- 6847 Johnston Community College 10/ 2/ 07
ISA- 2007- 6850 Martin Community College 12/ 13/ 07
ISA- 2007- 6852 McDowell Technical Community College 1/ 2/ 08
ISA- 2007- 6860 Pamlico Community College 1/ 3/ 08
ISA- 2007- 6861 Piedmont Community College 7/ 20/ 07
ISA- 2007- 6864 Randolph Community College 9/ 14/ 07
ISA- 2007- 6868 Roanoke- Chowan Community College 10/ 2/ 07
ISA- 2007- 6870 Robeson Community College 9/ 14/ 07
ISA- 2007- 6874 Rowan- Cabarrus Community College 7/ 18/ 07
ISA- 2007- 6883 Stanly Community College 9/ 18/ 07
ISA- 2007- 6896 Wilkes Community College 1/ 3/ 08
North Carolina Office of the State Auditor
Increasing Efficiency... Exposing Fraud 37
ISA- 2007- 6898 Wilson Technical Community College 7/ 16/ 07
ISA- 2008- 4200 North Carolina Department of Transportation 2/ 15/ 08
ISA- 2008- 4440A Department of Health and Human Services 3/ 27/ 08
ISA- 2008- 4440B Department of Health and Human Services 3/ 27/ 08
ISA- 2008- 4700 North Carolina Department of Revenue 9/ 12/ 08
ISA- 2008- 6832 Fayetteville Technical Community College 3/ 3/ 08
ISA- 2008- 6851 Mayland Community College 1/ 25/ 08
ISA- 2008- 6866 Richmond Community College 1/ 7/ 08
ISA- 2008- 6884 Surry Community College 1/ 23/ 08
ISA- 2008- 6890 Wake Technical Community College 3/ 6/ 08
NGV- 2006- 9101 North Carolina Partnership for Children Inc. - Financial Statement Audit 7/ 16/ 07
NGV- 2006- 9110 Mecklenburg Partnership for Children - Financial Statement Audit 7/ 30/ 07
NGV- 2006- 9127 Buncombe County Partnership for Children Inc. - Financial Statement Audit 6/ 29/ 07
NGV- 2007- 9101 North Carolina Partnership for Children Inc. - Financial Statement Audit 5/ 30/ 08
NGV- 2007- 9102 Burke County Smart Start Inc. - Financial Statement Audit 2/ 11/ 08
NGV- 2007- 9103 Caldwell County Smart Start A Partnership for Young Children -
Financial Statement Audit 5/ 20/ 08
NGV- 2007- 9104 Cleveland County Partnership for Children Inc. - Financial Statement Audit 2/ 1/ 08
NGV- 2007- 9108 Hertford County Partnership for Children Inc. - Financial Statement Audit 2/ 11/ 08
NGV- 2007- 9109 Jones County Partnership for Children - Financial Statement Audit 4/ 4/ 08
NGV- 2007- 9111 Orange County Partnership for Young Children - Financial Statement Audit 3/ 3/ 08
NGV- 2007- 9114 Ashe County Partnership for Children - Financial Statement Audit 2/ 11/ 08
NGV- 2007- 9115 Avery County Smart Start: A Partnership for Children - Financial Audit 5/ 1/ 08
NGV- 2007- 9117 Chatham County Partnership for Children - Financial Statement Audit 2/ 21/ 08
NGV- 2007- 9119 Durham Partnership for Children - Financial Statement Audit 3/ 4/ 08
NGV- 2007- 9122 Lenoir/ Greene Partnership for Children Inc. - Financial Statement Audit 2/ 13/ 08
NGV- 2007- 9124 Person County Partnership for Children - Financial Statement Audit 3/ 20/ 08
NGV- 2007- 9126 Alleghany Partnership for Children Inc. - Financial Statement Audit 5/ 21/ 08
NGV- 2007- 9129 Pamlico Partnership for Children Inc. - Financial Statement Audit 4/ 14/ 08
NGV- 2007- 9130 Randolph County Partnership - Financial Statement Audit 2/ 20/ 08
NGV- 2007- 9132 Rutherford/ Polk Smart Start Partnership - Financial Statement Audit 5/ 9/ 08
NGV- 2007- 9136 Tyrrell- Washington Partnership for Children Inc. - Financial Statement Audit 1/ 15/ 08
NGV- 2007- 9137 Wilson County Partnership for Children - Financial Statement Audit 5/ 20/ 08
NGV- 2007- 9138 Anson County Partnership for Children - Financial Statement Audit 2/ 15/ 08
NGV- 2007- 9139 Smart Start of Brunswick County Inc. - Financial Statement Audit 6/ 4/ 08
NGV- 2007- 9140 The Bertie County Partnership for Children Inc. - Financial Statement Audit 5/ 1/ 08
NGV- 2007- 9143 Guilford County Partnership for Children - Financial Statement Audit 3/ 3/ 08
NGV- 2007- 9144 Hoke County Partnership for Children and Families - Financial Statement Audit 2/ 27/ 08
Annual Report 2008 | Appendix A
38 Increasing Efficiency... Exposing Fraud
NGV- 2007- 9146 Lee County Partnership for Children - Financial Statement Audit 4/ 25/ 08
NGV- 2007- 9150 Alamance Partnership for Children - Financial Statement Audit 2/ 1/ 08
NGV- 2007- 9151 Alexander County Partnership for Children - Financial Statement Audit 3/ 20/ 08
NGV- 2007- 9152 Beaufort Hyde Partnership for Children - Financial Statement Audit 2/ 15/ 08
NGV- 2007- 9153 Bladen Smart Start A Partnership for Childern Inc. - Financial Statement Audit 5/ 21/ 08
NGV- 2007- 9155 Carteret County Partnership for Children - Financial Statement Audit 3/ 19/ 08
NGV- 2007- 9157 The Chowan/ Perquimans Smart Start Partnership - Financial Statement Audit 3/ 19/ 08
NGV- 2007- 9160 Smart Start of Davie County Inc. - Financial Statement Audit 4/ 4/ 08
NGV- 2007- 9161 Franklin- Granville- Vance Partnership for Children Inc. -
Financial Statement Audit 2/ 15/ 08
NGV- 2007- 9163 Harnett County Partnership for Children - Financial Statement Audit 2/ 27/ 08
NGV- 2007- 9164 Smart Start of Henderson County Inc. - Financial Statement Audit 5/ 2/ 08
NGV- 2007- 9166 Partnership for Children of Johnston County Inc. - Financial Statement Audit 3/ 19/ 08
NGV- 2007- 9167 Partnership for Children of Lincoln Gaston Counties Inc. -
Financial Statement Audit 1/ 16/ 08
NGV- 2007- 9168 Madison County Partnership for Children and Families Inc. -
Financial Statement Audit 2/ 11/ 08
NGV- 2007- 9170 The Mitchell Yancey County Partnership for Children Inc. -
Financial Statement Audit 5/ 2/ 08
NGV- 2007- 9171 Northampton Partnership for Children Inc. - Financial Statement Audit 2/ 15/ 08
NGV- 2007- 9176 Montgomery County Partnership for Children - Financial Statement Audit 7/ 28/ 08
NGV- 2007- 9180 Smart Start of Transylvania County - Financial Statement Audit 5/ 28/ 08
NGV- 2007- 9182 Union County Partnership for Children - Financial Statement Audit 4/ 4/ 08
NGV- 2007- 9184 The Partnership for Children of Wayne County Inc. - Financial Statement Audit 3/ 4/ 08
NGV- 2007- 9185 Smart Start of Yadkin County Inc. - Financial Statement Audit 2/ 13/ 08
NGV- 2007- 9186 Richmond County Partnership for Children - Financial Statement Audit 4/ 25/ 08
PER- 2007- 7226 Enterprise Project Management Office 7/ 26/ 07
PER- 2007- 7227 State Childrens Health Insurance Program Claims Processing 7/ 24/ 07
PER- 2007- 7229 Department of Transportation Highway Project Schedules and Costs 2/ 7/ 08
PER- 2007- 7229A Attachments to Dept. of Transportation Highway Project Schedules and Costs 2/ 7/ 08
PER- 2007- 7230 North Carolina Department of Transportation Funding Allocation Practices 6/ 3/ 08
PER- 2007- 7231 Albemarle Mental Health Center 10/ 9/ 07
PER- 2007- 7232 Academically or Intellectually Gifted Program 2/ 14/ 08
PER- 2007- 7233 North Carolina Education Lottery - Performance Audit 4/ 10/ 08
PER- 2007- 7236 Department of Environment and Natural Resources - Division of Air Quality 4/ 17/ 08
PER- 2007- 7801 Information Technology Services & Wildlife Resources Commission 3/ 26/ 08
PER- 2008- 7223F Follow- up to Office of Indigent Defense Services 2/ 8/ 08
SAR- 2007- 4440 North Carolina Division of Social Services 12/ 12/ 07
SAR- 2008- 6030 North Carolina State University 6/ 4/ 08
SAR- 2008- 6040 University of North Carolina at Greensboro 9/ 4/ 08
North Carolina Office of the State Auditor
Increasing Efficiency... Exposing Fraud 39
Appendix B
The Office of the State Auditor independently
evaluates the state’s fiscal accountability
and public program performance for North
Carolina’s citizens and others. The office strives
to assure that state government is executing its
management responsibilities in compliance with
applicable laws, rules, regulations, and policies.
The office also evaluates whether sufficient
management controls and policies exist to enable
state agencies to most efficiently and effectively
use public resources.
STATUTORY AUTHORITY
North Carolina General Statutes § § 147- 64.1-
64.14 set forth the duties and responsibilities of
the State Auditor, and requires the State Auditor
be independent of the organizations being audited.
These statutes mandate that all state agencies and
entities partially or entirely supported by public
funds be subject to audit by the state auditor. These
audits independently evaluate public program
performance for the General Assembly, Governor,
executive departments and agencies, governing
bodies, and the general public. Specifically, the
State Auditor independently examines and makes
findings of fact on whether State agencies:
■ established adequate operating and administrative
procedures, reporting systems, and elements of
management control
■ provided financial and other reports that disclose
fairly, consistently, fully, and promptly all
information necessary to demonstrate program
performance
■ collected, deposited, and properly accounted for
all revenues and receipts arising from activities
■ conducted programs and expended funds in an
efficient and economical manner as well as in
compliance with applicable laws and regulations
■ determined that programs effectively served the
legislative intent.
The Office of the State Auditor is also statutorily
mandated to conduct certain audits, including the
largest audit, the State’s Comprehensive Annual
Financial Report ( CAFR). These audits are required
to be conducted in accordance with appropriate
professional standards.
The Investigative staff is statutorily mandated to
investigate allegations of improper activities, which
may occur as a result of misfeasance, malfeasance or
nonfeasance by governmental employees or those
receiving state money. Investigators are required
to protect complainants who provide information
to the State Auditor related to these charges. This
section operates under the supervision of the Chief
Deputy State Auditor.
CONSTITUTIONAL AGENCY
The State Auditor is a constitutional officer listed
in the North Carolina Constitution under Article III,
§ 7. The State Auditor is elected statewide every four
years and is a member of the Council of State which
also includes the Governor, Lieutenant Governor,
Secretary of State, State Treasurer, Superintendent
of Public Instruction, Attorney General,
Commissioner of Agriculture, Commissioner of
Labor, and Commissioner of Insurance.
Statutory and Constitutional Authority
Annual Report 2008 | Appendix B
40 Increasing Efficiency... Exposing Fraud
SENIOR MANAGEMENT TEAM
Leslie W. Merit, Jr., CPA, CFP
State Auditor
Leslie_ Merritt@ ncauditor. net
( 919) 807- 7500
Kris Bailey, J. D.
Chief Deputy
Kris_ Bailey@ ncauditor. net
( 919) 807- 7665
Jef Henderson, CPA, CISA,
Deputy State Auditor
Jeff_ Henderson@ ncauditor. net
( 919) 807- 7513
Charles K. Ducket
Personnel Officer
Charles_ Duckett@ ncauditor. net
( 919) 807- 7617
James L. Forte
Director of Internal Operations and
Legislative Affairs
James_ Forte@ ncauditor. net
( 919) 807- 7642
Rene Gelerson
Executive Assistant to the Chief Deputy
Renee_ Gellerson@ ncauditor. net
( 919) 807- 7628
Cindy Giliam
Controller
Cindy_ Gilliam@ ncauditor. net
( 919) 807- 7553
Timothy J. Hoegemeyer, J. D.,
MPA
General Counsel
Tim_ Hoegemeyer@ ncauditor. net
( 919) 807- 7670
Christopher F. Mears, J. D., MPP
Director of Public Affairs
Chris_ Mears@ ncauditor. net
( 919) 807- 7566
Pat Stusie
Executive Assistant to the Auditor
Pat_ Stussie@ ncauditor. net
( 919) 807- 7676
Leny Supervile , Ph. D.
Chief Information Officer
Lenny_ Superville@ ncauditor. net
( 919) 807- 7625
AUDIT MANAGEMENT TEAM
Keneth Barnete, CPA, MBA
Specialty: Performance Audits
Kenneth_ Barnette@ ncauditor. net
( 919) 807- 7540
Joyce Flowers, CPA
Specialty: Single Audit
Wilmington Branch
Joyce_ Flowers@ ncauditor. net
( 919) 807- 7550
Janet Hayes , CPM, CICA, MBA
Specialty: Services to nongovernmental
groups
Janet_ Hayes@ ncauditor. net
( 919) 807- 7558
Linda Holar, CPA
Specialty: Universities, UNC, UNC
Hospitals, NCSU
Linda_ Hollar@ ncauditor. net
( 919) 807- 7565
Lee Linker, CPA
Specialty: Quality Control
Lee_ Linker@ ncauditor. net
( 919) 807- 7583
David Nance, CPA
Specialty: Health Issues
David_ Nance@ ncauditor. net
( 919) 807- 7660
Frank L. Pery
Specialty: Investigative Audits
Frank_ Perry@ ncauditor. net
( 919) 807- 7604
Lyne Sanders, CPA
Specialty: CAFR
Lynne_ Sanders@ ncauditor. net
( 919) 807- 7615
Carol Smith, CPA
Specialty: Community Colleges
Asheville Branch
Charlotte Branch
Morganton Branch
Winston- Salem Branch
Carol_ Smith@ ncauditor. net
( 336) 585- 2513
Faye Stele, CPA
Specialty: Clerks of Court
Fayetteville Branch
Greensboro Branch
Greenville Branch
Edenton Branch
Faye_ Steele@ ncauditor. net
( 919) 807- 7589
Charles Wiliford, CPA, CITP,
CISA, CFE, CPM
Specialty: Information Systems Audits
Charles_ Williford@ ncauditor. net
( 919) 807- 7627
Copies of reports issued by the Office of the State
Auditor may be requested through the email link on
the web site at www. ncauditor. net or by calling the
main phone number. Other inquiries, comments,
and suggestions may be made by contacting the
main office or one of the staff members listed below.
N. C. Office of the State Auditor
2 South Salisbury Street
20601 Mail Service Center
Raleigh, NC 27699- 0601
Main Phone Number: ( 919) 807- 7500
Hotline Number: ( 800) 730- 8477
Fax Number: ( 919) 807- 7600
Contact Information
North Carolina Office of the State Auditor
North Carolina Office of the State Auditor
2 South Salisbury Street
20601 Mail Service Center
Raleigh, NC 27699- 0601
Main Phone Number: ( 919) 807- 7500
Hotline Number: ( 800) 730- 8477
Fax Number: ( 919) 807- 7647
OSA printed this report in- house as a cost saving measure for taxpayers.

honesty • integrity • Professionalism
A R S P
North Carolina O ce of the State Auditor
LESLIE W. MERRITT, JR., CPA, CFP
increasing efficiency... exposing fraud
Increasing Efficiency... Exposing Fraud
3 Message from the Auditor
4 2009 Strategic Plan
7 Executive Summary
9 Financial Audit Division
11 Management Services &
Nongovernmental Compliance Division
14 Investigative Division
22 Performance Audit Division
25 Information Systems Audit Division
29 General Administration
32 Appendix A
39 Appendix B
40 Contact Information
Contents
Annual Report 2008 | Contents
Increasing Efficiency... Exposing Fraud
Annual Report 2008 | Message from the Auditor
S erving as North Carolina’s State Auditor for the last four years
has been a privilege and an honor. The State has seen a growing
emphasis on government ethics as taxpayers increasingly seek
to hold State government accountable for the spending of taxpayer
money. I am pleased to say that the Office of the State Auditor has
played an important role in the process through our audits and
investigations of fraud, waste and abuse of State resources.
One of the single most important factors of holding State
government accountable is transparency. I believe that transparency
is an essential element in the functioning of any representative
democracy. If State government is run from behind a curtain and is
not transparent, its citizenry may grow suspicious of its actions or motivations leading to the public’s
disillusionment and apathy towards government institutions. However, sunshine is a marvelous
antiseptic for this ailment in government and I believe that opening State agencies’ books and records,
with respect for State law and as an effort to increase transparency, is the first step in reversing any
negative trends flowing from past bureaucratic stonewalling and government secrecy.
The Office of the State Auditor is willing to lead by example. History reveals no other time when
technology has provided such an accessible platform as the World Wide Web. Through new technology,
State agencies and departments are able to display accurate and timely information regarding the
spending of taxpayer money. For years the State Auditor’s Office has published its work product
on the World Wide Web in an easily accessible format to enable public scrutiny and review. Now,
we are preparing to take the extra step to increase transparency by publishing the Office’s budget,
expenditures and contract information on our website at www. ncauditor. net.
It is my hope that the Office of the State Auditor is the first of many State agencies willing to take
this step out from behind the government curtain and into the sunlight. I put my faith in the public
trust as I work towards the goal of strengthening State government by increasing transparency and
accountability to the taxpayer. I am willing to do my part, and on behalf of North Carolina’s taxpayers
I challenge other agency and department heads to do the same.
Sincerely,
State Auditor Leslie Merritt
Message from the Auditor
Increasing Efficiency... Exposing Fraud
T he Office of the State Auditor has been
a leader in holding State government
accountable and recommending
government reforms. Beginning with the
release of this report, the State Auditor’s office is
preparing to lead State government into an era of
greater transparency by posting budget, expenses
and contract information on the State Auditor’s
website ( www. ncauditor. net). The available
content will first include Fiscal Years 2007- 2008
and 2008- 2009 with plans to update the current
numbers every quarter and reach back and post
previous fiscal years as we move forward. We
recognize that this is only a first step in greater
transparency in State government and trust that
as the Office of the State Auditor breaks new
ground, other agencies and departments will
follow.
In addition to our focus on increased
transparency, we recognize that the consistent
and professional audits and investigations
performed by State auditors lend assurance and
credibility to other State government agencies’
record of supporting the public. Therefore, it is
incumbent on the Office of the State Auditor
to set challenging, yet attainable goals and
objectives for the 2008- 2009 Fiscal Year. The
following are goals and objects broken- down by
audit division:
Financial Audit Division
The subjects and frequency of audits in our
Financial Audit Division are largely dictated by
State statute or federal requirements and remain
mostly constant every fiscal year. These audits
include State agencies, all sixteen universities,
fifty- eight community colleges, clerks of superior
court in all 100 counties, the state’s Comprehensive
Annual Financial Report ( CAFR), Smart Start
nonprofit organizations, and Fiscal Control audits
at agencies not audited annually.
Smart Start audits are one variable within the
Financial Audit Division. The Office of the State
Auditor is able to contract with private CPA firms
to cost- effectively perform these audits which allow
State auditors to devote themselves to other audits
and uncovering fraud, waste and abuse of State
resources. For the Fiscal Year ended June 30, 2007,
45 Smart Start audits were performed, 39 by CPA
firms averaging $ 9,192 per audit. In prior years, the
average cost for the Office of the State Auditor to
conduct a Smart Start audit was $ 25,459 per audit.
That equals a $ 16,267 savings per audit or $ 634,423
per year. For Fiscal Year 2007- 2008, all Smart Start
audits will be contracted with CPA firms and meet
the goals of increasing savings for the taxpayer.
In addition, the Office of the State Auditor will be
releasing all Smart Start audits by March 31, 2009.
It is anticipated that the earlier release of the audit
reports will allow the North Carolina Partnership
for Children, Inc., and the local partnerships to
more quickly address identified deficiencies and
to make the necessary improvements to ensure
accountability of state funds.
Management Services and
Nongovernmental Compliance Division
The Management Services and Nongovernmental
Compliance Division ( MS& NGCD) focuses on
the spending of State and federal pass- through
2009 Strategic Plan
North Carolina Office of the State Auditor
Increasing Efficiency... Exposing Fraud
grants to non- profits. In Fiscal Year 2008- 2009,
MS& NGCD will focus on the administration
of the Grants Information Center ( GIC) online
reporting system that opened in 2008 and
will streamline the process of satisfying filing
requirements of State grants.
Most non- profits satisfy their grant requirements
and filing deadlines. However, increased
monitoring resulting in a decrease in the level
of noncompliance is a goal that will ensure that
taxpayers’ money reaches the communities it was
intended to serve. The reality is that the number
of noncompliant grantees ebbs and flows with
reporting deadlines. MS& NGCD’s goal for Fiscal
Year 2008- 2009 is to continue efforts to reduce the
number of noncompliant grants by 15%, keeping
the total value of those in noncompliance to no
more than 5% of the total grants awarded.
In addition to monitoring compliance levels,
MS& NGCD is equipping non- profits with the
necessary skills needed to properly account for
State grant funds and to remain in compliance.
These skills can be learned through MS& NGCD’s
available training courses. MS& NGCD plans to
continue the State Auditor’s efforts for Fiscal Year
2008- 2009 by offering both live and online grants
training. MS& NGCD will conduct a minimum
of six live sessions per month, in addition to
offering online courses in an e- Learning format
that includes a course test for each participant. An
important part of training is providing information
to grantees and grantors that is relevant to their
particular circumstances. To aid in this effort, the
MS& NGCD will continue to issue its Best Practices
quarterly newsletter and identify other efforts to
benefit both grantors and grantees. Best Practices
is distributed to all 5,000+ grantees identified in
our grants database, as well as to agency personnel
involved with grants administration.
To ensure accountability and compliance,
the Office of the State Auditor investigates
the spending of grant funds by non- profit
organizations. The goal for Fiscal Year 2008- 2009
is to increase the number of new investigations
to 40 by the end of this fiscal year, a 48% increase
in investigations. In an effort to help train agency
monitors to be proactive, MS& NGCD plans to
conduct separate monitoring reviews of grantor
agencies. For Fiscal Year 2007- 2008, these reviews
were conducted in conjunction with the grant
investigation. MS& NGCD’s goal is to complete 12
separate agency monitoring reviews by the end of
Fiscal Year 2008- 2009.
Investigative Division
The Investigative Division forms the core of the
Office of the State Auditor’s watchdog function.
Through this Division, the State Auditor’s Office is
able to proactively uncover fraud, waste and abuse
in State government. The Investigative Division’s
goals for Fiscal Year 2008- 2009 are to effectively
promote the State Auditor’s Hotline, enhance
the Investigative Task Force and increase the
efficiency and effectiveness of handling multiple
investigations simultaneously.
The Investigative Division achieved remarkable
results for the 2007- 2008 Fiscal Year. Specifically,
the Division had 29 open cases as of July 11, 2007,
and opened 257 during Fiscal Year 2007- 2008. The
State Auditor’s Office and the respective agencies
assisting with referrals closed 241 cases, with 45
pending serious matters as of June 30, 2008. The
average age of cases closed was 57 days. Nearly
doubling the intake while using half the time to
resolve these matters is a credit to the women and
men of the Investigative Division, and the internal
Annual Report 2008 | Strategic Plan
Increasing Efficiency... Exposing Fraud
auditors of the various state agencies who have
come to work more closely and effectively with the
State Auditor and his staff.
Performance Audit Division
Compared to other divisions in the Office of
the State Auditor, the Performance Audit Division
is uniquely engineered to evaluate whether State
programs are reaching their goals. For Fiscal Year
2008- 2009, the Division plans to conduct more
performance audits than in Fiscal Year 2007- 2008,
equip performance auditors with additional tools
through new training, and provide greater flexibility
to meet emerging needs when they arise.
The Performance Audit Division was recognized
by the National State Auditors Association for best
2008 performance audit less than 2000 hours. The
audit entitled Internal Auditing in North Carolina
Agencies and Institutions is an example of the type
of performance audits that will continue to be
conducted by the Office of the State Auditor in
Fiscal Year 2008- 2009.
Information Systems Audit Division
The Information Systems ( IS) Audit Division’s
responsibilities include analyzing State agency
computer systems to ensure that they are properly
secured, produce accurate financial reports and
comply with State regulations. IS Division auditors
are in a unique position to think proactively about
discovering suspicious data trends flowing from
an agency’s information systems.
The State Auditor’s goal for Fiscal Year 2007-
2008 was to continue the collaboration between
IS auditors and the Financial and Investigative
audit teams and to increase proactive auditing
by providing computer forensic assistance and
data mining analyses of agency financial data. At
a university official’s request, the State Auditor
used that collaborative effort to uncover a widely
reported case regarding university employees
using taxpayers’ resources to operate an unlawful
pirating ring that downloaded Hollywood movies
and pornographic pictures and films. For the 2008-
2009 Fiscal Year, the Office of the State Auditor
plans to continue this collaboration and increase
its focus on fraud, waste and abuse in the State’s
information technology systems.
The IS Audit Division performs Strategic
Audit Reviews that are issued separately from IS
audits. These reviews are used to uncover fraud,
waste or abuse of taxpayer resources by following
suspicious State agency data trends. A recent target
of an IS Strategic Audit Review was to identify
invalid Social Security Numbers ( SSNs) in the
North Carolina Division of Social Services. This
review found 1,906 SSNs that were invalid. The
review also found 1,237 SSNs that belonged to the
deceased persons category on the Social Security
Administration’s Death File. Finally, the review
found 69 food stamp recipients with a certification
date equal to or greater than 45 days after their date
of death. The IS Audit Division plans to conduct
a greater number of Strategic Audit Reviews in
Fiscal Year 2008- 2009.
In addition to investigative activities, the IS
Audit Division is currently implementing an
upgrade to the Agency’s existing audit software.
This software will allow easier access to auditee
data by auditors in other sections of the office and
will allow the use of a built in “ Extract, Transmit,
and Load” ( ETL) technology that will expedite
the acquisition of agency data to be used by the
Financial Auditors in financial audits and by IS
auditors in their strategic reviews.
North Carolina Office of the State Auditor
Increasing Efficiency... Exposing Fraud
Financial Audit Division
• State Auditors identified $ 1,180,411 in questioned
costs resulting from 129 identified audit
findings. This represents a significant increase in
questioned costs and the number of findings over
the prior year ($ 507,833 and 89, respectively).
• The Office of the State Auditor saved a recurring
$ 634,413 on 39 Smart Start audits by contracting
with private CPA firms for Fiscal Year 2007- 2008.
In Fiscal Year 2008- 2009, the Agency plans to
contract- out all Smart Start audits to increase
this savings for the taxpayer.
Management Services and
Nongovernmental Compliance Division
• During Fiscal Year 2007- 2008, the State
Auditor’s Office trained 2,882 participants in 99
training sessions on improving accountability
and compliance with state and federal grant
requirements. That brings the total number
of participants trained since August 2005 to
approximately 11,075.
• While the monthly percentage varies, the rate
of grant recipients in noncompliance with their
grant requirements dropped 7% from July 1, 2007
to June 30, 2008. That represents a decline in the
percentage of noncompliant grantees to 11.4%
of total grants ( 2.9% of total grant dollars). This
reflects the proper accounting of an additional
$ 13.1 million.
��� In February 2008, the State Auditor opened
the online Grants Information Center ( GIC)
allowing grantor agencies and non- State grantees
to file annual reports online. By June 30, 2008,
more than 1,500 grantees used GIC to file their
2007 annual reports online. Improvements
through GIC will help eliminate redundancy,
increase data capture efficiency and improve
reporting timeliness.
• For Fiscal Year 2008- 2009, MS& NGCD carried
forward four grant investigations from Fiscal
Year 2007- 2008, opened 25 and completed 27
investigations. These investigations resulted in the
State Auditor’s Office recommending repayment
of $ 797,692 in grant funds, equal to an average of
$ 29,544 per investigation.
Investigative Division
• The Investigative Division had 29 open cases as
of July 2007 and opened 257 cases during Fiscal
Year 2007- 2008.
• The State Auditor’s Office and the respective
agencies assisting with referrals closed 241 cases
in Fiscal Year 2007- 2008, with 45 cases pending.
• The State Auditor’s Office reduced the average
case age to 57 days from 315 days in Fiscal Year
2004- 2005.
Performance Audit Division
• The Performance Audit Division was recognized
by the National State Auditors Association for best
2008 performance audit less than 2000 hours. The
audit entitled Internal Auditing in North Carolina
Agencies and Institutions is an example of the type
of valuable contribution the Performance Audit
Division makes to the Office of the State Auditor
and State government in general.
Executive Summary
Annual Report 2008 | Executive Summary
Increasing Efficiency... Exposing Fraud
• Performance Audits conducted in Fiscal
Year 2007- 2008 include: the North Carolina
Education Lottery, Albemarle Mental Health
Center, Academically or Intellectually Gifted
Program, Department of Transportation
Highway Schedules and Costs, Department of
Juvenile Justice and Delinquency Prevention,
Department of Health and Human Services
Division of Medical Assistance, Department of
Environment and Natural Resources.
Information Systems Audit Division
• The IS Audit Division conducted Strategic Audit
Reviews of North Carolina Division of Social
Services and North Carolina State University.
These reviews uncovered thousands of invalid
Social Security Numbers and university
employees using taxpayer money for their
personal use.
General Administration
• The follow- up to the 2006 AuditWatch
curriculum was completed in 2007. Efficiency
levels were analyzed and recommendations
from AuditWatch were implemented with
impressive results. In 2005, the Office of the
State Auditor used 103,703 audit hours in
the Financial Audit Division alone. After the
AuditWatch efficiencies were in place, the
Financial Audit Division used only 87,358 audit
hours. This equates to a total efficiency gain of
15,980 audit hours or $ 1,358,300 ( audit hours x
billing rate).
• In 2008, the State Auditor’s Office became an
authorized Continuing Professional Education
( CPE) sponsor recognized by the NC State Board
of CPA Examiners. This is part of the ongoing
commitment by the State Auditor to conduct
quality continuing education.
North Carolina Office of the State Auditor
Increasing Efficiency... Exposing Fraud
S taff in the Financial Audit Section audit state
agencies, universities, community colleges,
clerks of Superior Court, and Smart Start
nonprofit organizations. The State Auditor is
required to perform these audits as part of its
statutory responsibilities or to comply with federal
requirements. Some audits are performed at the
State Auditor’s discretion to ensure that all agencies
are properly reporting their financial conditions.
The Office of the State Auditor spent the greatest
percentage of hours ( 49%) to perform annual
financial statement audits including those of the
State’s sixteen universities and fifty- eight community
colleges. One of its largest financial audits is the
state’s Comprehensive Annual Financial Report
( CAFR), which accounted for 15% of staff hours.
The CAFR contains the annual financial statements
for the State of North Carolina as a whole.
Another major financial audit project, accounting
for 29% of staff time, is the state’s Single Audit
Report. The Single Audit Report contains the
results of the audit of the state’s financial statements
and the audit of the state’s compliance with laws and
regulations pertaining to federal grant programs.
The Agency also periodically audits selected fiscal
controls of clerks of Superior Court and general
government agencies.
The audit staff conducts financial and compliance
audits of the organizations participating in the
Smart Start program, including the statewide
coordinating agency ( The North Carolina
Partnership for Children, Inc.) and the individual
local partnerships. Smart Start is an early childhood
development program designed to prepare children
to begin school healthy and ready to succeed.
Currently, 78 Smart Start partnerships operate
throughout the state.
Financial Audit Results Summary
For the fourteenth consecutive year, the State Au-ditor
issued an unqualified opinion on the State’s fi-nancial
statements. This opinion, for the Fiscal Year
ended June 30, 2007, was contained in the CAFR
prepared by the Office of the State Controller.
The State of North Carolina also received the
Certificate of Achievement for Excellence in Fi-nancial
Reporting from the Government Finance
Officers Association for the fourteenth consecu-tive
year. This award is given to government units
whose CAFR achieves the highest standards in gov-ernment
accounting and financial reporting.
In conjunction with the audit of the State’s finan-cial
statements, the State Auditor issues a report
on internal control over financial reporting and on
compliance and other matters based on an audit
of financial statements in the Single Audit Report.
Nine findings of non- compliance and weaknesses
in internal control related to the financial statement
audit were reported. These findings disclosed inter-nal
control deficiencies related to separation of du-ties,
year- end financial reporting, and approval of
journal entries.
With regard to compliance with federal program
requirements, the State Auditor issued a qualified
opinion on certain federal programs due to mate-rial
noncompliance with certain requirements. In
total, auditors identified $ 1,180,411 in questioned
costs resulting from 129 identified audit findings.
Financial Audit Division
Annual Report 2008 | Financial Audit Division
0 Increasing Effi ciency... Exposing Fraud
Th is represents a signifi cant increase in questioned
costs and the number of fi ndings over the prior year
($ 507,833 and 89, respectively).
In addition to reporting on the CAFR and Single
Audit at the statewide level,
the Offi ce of the State Audi-tor
publishes in separately
issued reports the audit fi nd-ings
and recommendations
from CAFR and Single Au-dit
work for each individual
government agency.
Reported fi ndings from
university and community
college audits for Fiscal Year
2007 primarily related to four
areas: access rights, fi nan-cial
statement preparation,
management oversight and
internal control weaknesses.
Th ese internal control weak-nesses
were in areas such as
fi nancial aid awards, cash
receipts and deposits, cash
disbursements and separa-tion
of duties.
In the Clerk of Superior
Court audits performed in
Fiscal Year 2007, the State Auditor’s Offi ce noted
internal control weaknesses. Th ese internal control
weaknesses were in areas such as timely invest-ments,
cash receipts, segregation of duties, and
timely deposits.
Smart Start fi ndings issued during 2006- 2007 fo-cused
on internal control weaknesses and fi nancial
statements errors. For the Fiscal Year ended June
30, 2007, 45 Smart Start audits were performed,
39 by CPA fi rms averaging
$ 9,192 per audit. In prior
years, the average cost for the
Offi ce of the State Auditor to
conduct a Smart Start audit
was $ 25,459 per audit. Th at
equals a $ 16,267 savings per
audit or $ 634,423 per year.
For Fiscal Year 2007- 2008,
all Smart Start audits will be
contracted with CPA fi rms
and meet the goal of increas-ing
savings for the taxpayer.
In addition, the Offi ce
of the State Auditor will be
releasing all Smart Start au-dits
by March 31, 2009. It is
anticipated that the earlier
release of the audit reports
will allow the North Caroli-na
Partnership for Children,
Inc., and the local partner-ships
to more quickly ad-dress
identifi ed defi ciencies
and to make the necessary improvements to ensure
accountability of state funds.
A complete list of Financial Audit Division au-dits
( prefi xes FCA, FIN and NGV) is detailed in
Appendix A.
In total, auditors
identifi ed $ 1,180,411
in questioned costs
resulting from
129 identifi ed
audit fi ndings.
Th is represents a
signifi cant increase
in questioned costs
and the number of
fi ndings over the prior
year.
North Carolina Office of the State Auditor
Increasing Effi ciency... Exposing Fraud
Management Services &
Nongovernmental Compliance
Division
T he Management Services and
Nongovernmental Compliance Division
( MS& NGCD), has the responsibility of
increasing oversight and accountability of State
and Federal pass- through grants typically given
to nonprofi t organizations. MS& NGCD responds
to the growing need for compliance oversight
and training to adhere to changing reporting
requirements.
MS& NGCD’s mission is to increase training
and “ best practices” for nonprofi t organizations
receiving State grants and to increase compliance
and accountability of funds on the grantee and
funding agency levels. MS& NGCD has set
measurable goals for Fiscal Year 2008- 2009 based
on past accomplishments.
Th e Offi ce of the State Auditor is pleased to
report that MS& NGCD continues to meet all areas
of its original mission. Th e following is a summary
of accomplishments for Fiscal Year 2007- 2008:
Training
• Grants Training: During Fiscal Year 2007- 2008,
MS& NGCD trained 2,882 participants in 99
training sessions, bringing the total number
of participants trained since August 2005 to
approximately 11,075.
• Eff ective Grants Administration Certifi cate
Program: Working with the Offi ce of State
Personnel, MS& NGCD established the Eff ective
Grants Administration Certifi cate Program
in 2007, consisting of fi ve core grants training
courses that provide the basics for proper
oversight and accountability of grant funds.
During Fiscal Year 2007- 2008, 61 grantee and
agency personnel have earned this Certifi cate
bringing the total number of Certifi cate holders
to 120.
• Multifaceted Training: Other types of training
included grants administration sessions tailored
to State agency program and fi nancial personnel,
grants reporting/ accountability sessions tailored
to grantees, special sessions conducted at the
request of various groups ( e. g., specifi c agencies
and state level associations of various types)
and presentations at 16 conferences during the
Fiscal Year 2007- 2008.
Compliance
• Increased Grantee Compliance: Posting
of the monthly noncompliance list on the
State Auditor’s website has served to inform
legislators, State funding agencies, and the
public which grantees have not complied with
the statutory reporting requirements. While the
monthly percentage varies, the noncompliance
rate dropped 7% from July 1, 2007 to June 30,
2008. Th at represents a decline in the percentage
of noncompliant grantees to 11.4% of total
grants ( 2.9% of total grant dollars). Th is refl ects
Annual Report 2008 | Management Services & Nongovernmental Compliance Division
12 Increasing Efficiency... Exposing Fraud
the proper accounting of an additional $ 13.1
million.
• Online Reporting Program: A major focus
of MS& NGCD for Fiscal Year 2008- 2009 is
finalizing the implementation of the North
Carolina Grants Information Center ( GIC). GIC
opened to grantors and grantees on February
28, 2008 and allows grantor agencies and non-
State grantees to file annual reports online. By
July 30, 2008, more than 1,500 grantees used
GIC to file their 2007 annual reports online.
Improvements through GIC will help eliminate
redundancy, increase data capture efficiency,
and improve reporting timeliness.
Best Practices and Research Assistance
• Quarterly Best Practices Newsletter: This
newsletter updates grantees on state grant
requirements, potential financial accountability
problems and developing adequate internal
policies and accounting controls. MS& NGCD
published four quarterly issues during Fiscal
Year 2007- 2008 with an email distribution of
more than 6,000. All issues are posted on the
State Auditor’s website ( www. ncauditor. net).
• Research and Reporting Assistance: MS& NGCD
continues to provide assistance, via telephone
or email, on unique, confusing or complicated
questions related to grants reporting and the
implementation of the GIC. Many of these
questions require research of both grantee and
grantor issues, with 519 requiring detailed
research.
• Current Documents and Formats: MS& NGCD
provides grantees and funding agencies with
information on required grant reporting
documents and formats through developing,
updating and maintaining online forms dictated
by the reporting statute.
Agency and Grantee Examinations
• Grant Investigations: For Fiscal Year 2007-
2008, MS& NGCD carried forward four grant
investigations from Fiscal Year 2006- 2007,
opened 25 and completed 27 investigations.
These investigations resulted in the State
Auditor’s Office recommending repayment of
$ 797,692 in grant funds, equal to an average of
$ 29,544 per investigation.
• Investigation Training Tools: MS& NGCD uses
the investigation process to educate State agency
personnel on monitoring techniques and to
suggest improvement to those techniques.
In addition, the investigation provides an
excellent opportunity to provide best practice
information on improving accountability
directly to grantees.
Special Projects
• Local Government Grants: MS& NGCD
continues to work closely with the Local
Government Commission at the state level to
identify and capture data on the approximately
$ 12 billion in grants flowing to local government
units.
Goals for Fiscal Year 2008- 2009
For Fiscal Year 2008- 2009, MS& NGCD will
focus on administration of the Grants Information
Center ( GIC) online reporting system. We will
continue to conduct training sessions statewide
for both funding agency and grantee personnel
North Carolina Office of the State Auditor
Increasing Effi ciency... Exposing Fraud
on the use of the GIC, as well as basic grant
functions. Th e GIC has increased the accuracy
and timeliness of grants data to all interested
parties while signifi cantly decreasing the workload
of the funding agencies
and the Offi ce of the State
Auditor. Th e GIC aff ords
both grantor agencies and
grantees a much simpler
method of complying
with statutory reporting
requirements.
Compliance reporting
and subsequent
processing is an important
bench mark in how
eff ective MS& NGCD
is at compliance and
accountability. Th e
number of noncompliant
grantees will ebb and
fl ow with reporting
deadlines. However, the
GIC will greatly improve
the timeliness of adding
noncompliant grantees
and removing grantees from the noncompliance
list when delinquent reports are provided. Th e
data in the GIC is updated nightly and will allow
the public to pull up a report showing the most
current noncompliance and suspension lists.
MS& NGCD’s goal for Fiscal Year 2008- 2009
is to continue eff orts to reduce the number of
noncompliant grants by 15%, keeping the total
value of those in noncompliance to no more than
5% of the total grants awarded.
Coordinating and cooperating with the grantor
agency is of primary importance to successfully
monitor and review nonprofi ts and their grantor
agencies. Th e goal for Fiscal Year 2008- 2009 is
to increase the number of new investigations to
40, a 48% increase in investigations. In an eff ort
to help train agency monitors to be proactive,
MS& NGCD plans to conduct
separate monitoring reviews
of grantor agencies. For
Fiscal Year 2007- 2008, these
reviews were conducted in
conjunction with the grant
investigation. MS& NGCD’s
goal is to complete 12 separate
agency monitoring reviews in
Fiscal Year 2008- 2009.
Training is an important
function of MS& NGCD,
and we plan to continue our
eff orts in Fiscal Year 2008-
2009 by off ering both live
and online grants training.
MS& NGCD will conduct a
minimum of six live sessions
per month, in addition to
off ering online courses in
an e- Learning format that
includes a course test for
each participant. An important part of training
is providing information to grantees and grantors
that is relevant to their particular circumstances.
To aid in this eff ort, MS& NGCD will continue to
issue its Best Practices quarterly newsletter and
identify other eff orts to benefi t both grantors
and grantees. Best Practices is distributed to all
5,000+ grantees identifi ed in our grants database,
as well as agency personnel involved with grants
administration.
A complete list of MS& NGCD reports ( prefi x
GRA) is detailed in Appendix A.
During Fiscal Year
2007- 2008, MS& NGCD
trained 2,882 participants
in 99 training sessions,
bringing the total number
of participants trained
since August 2005 to
approximately 11,075.
Annual Report 2008 | Management Services & Nongovernmental Compliance Division
Increasing Effi ciency... Exposing Fraud
T he Offi ce of the State Auditor’s Investiga-tive
Division has proven to be an eff ec-tive
tool for investigating allegations of
fraud, waste and abuse of State resources. Rely-ing
on State constitutional and statutory authority,
this Division of the State Auditor’s Offi ce exposes
the variety and frequency of
improper governmental ac-tivities
and abuses in State
government. Furthermore,
the State Auditor publishes
all material fi ndings in a
public report, and refers all
substantiated allegations
of criminal activity to law
enforcement and to the rel-evant
legal authorities for
investigation and prosecu-tion.
Th e majority of tips that
lead to investigations come
from the State Auditor’s
confi dential, 24- hour, toll-free
hotline [ 1- 800- 730-
TIPS ( 8477)]. Th is hotline is
designed for State employees
and the general public to report activities they
believe may be illegal or improper. Allegations of
fraud, waste and abuse may also be reported by
traditional mail or hotline@ ncauditor. net.
To protect the integrity of tips, allegations of
improper governmental activities are strictly
confi dential. In addition, State law provides
protection from retaliation or discrimination for
whistleblowers who report improper or illegal
activities to the State Auditor. Th e Investigative
Division takes seriously and responds accordingly
to all specifi c and credible allegations of improper
governmental activities, but is especially concerned
about allegations of retaliation that may bring a
chilling eff ect on future tips.
Th e Offi ce of the State
Auditor satisfi ed the
statutory requirement to
periodically promote the
State Auditor’s Hotline
in Fiscal Year 2007- 2008.
Consequently, the number
of cases opened has nearly
doubled since the previous
fi scal year. In addition, the
average case age has been
reduced by over 50%. Th e
Offi ce of the State Auditor
has eff ectively responded
to staffi ng needs of the
Investigative Division, and
the mission of this Division
has evolved into addressing
the more egregious and
notorious cases of fraud,
waste and abuse. Even those matters referred
by the State Auditor to other agencies’ internal
auditors are monitored by the Auditor’s staff for
timely inquiry and resolution.
Th e goals for Fiscal Year 2008- 2009 are to
eff ectively promote the State Auditor’s Hotline,
enhance the Investigative Task Force and increase
the effi ciency and eff ectiveness of handling
multiple investigations simultaneously.
Investigative Division
Th e Division had 29 open
cases as of July 11, 2007,
and opened 257 during
Fiscal Year 2007- 2008.
Th e State Auditor’s Offi ce
and the respective agencies
assisting with referrals
closed 241 cases, with 45
pending serious matters as
of July 30, 2008.
North Carolina Office of the State Auditor
Increasing Effi ciency... Exposing Fraud
In the fall of 2007, the Offi ce of the State Auditor
launched a statewide television ad blitz featuring
two 30 second spots designed to expose fraud,
waste and abuse in State government. Th is one
area is unique in that money spent to promote
the Hotline has reaped a far greater amount in
savings to the taxpayers when fraud, waste and
abuse of State money is uncovered. Timing of
this promotion was key, since the Investigative
Division prepared itself to
handle the sharp increase
in new cases. Specifi cally,
the Division had 29 open
cases as of July 11, 2007, and
opened 257 during Fiscal
Year 2007- 2008. It should be
noted that this number does
not include immediate and
undocumented referrals.
Th e State Auditor’s Offi ce
and the respective agencies
assisting with referrals
closed 241 cases, with 45
pending serious matters as
of July 30, 2008. In addition,
the average case age was 57
days. Nearly doubling the
intake while using half the
time to resolve these matters is a credit to the
women and men of the Investigative Division,
and the internal auditors of the various state
agencies who have come to work more closely and
eff ectively with the State Auditor and his staff .
Building on the team- centered approach that
was begun in 2005, the Offi ce of the State Auditor
launched a new entity labeled the Investigative Task
Force ( ITF) in 2007. Led by the new head of the
Investigations Division and the Chief Deputy State
Auditor, the ITF is designed to steer investigations
when a deeper vein of fraud, waste or abuse is
detected by using standard auditing techniques,
while applying more innovative investigative
and cyber- driven methods. Being comprised of
auditors and staff with investigative, performance,
non- profi t compliance, fi nancial and information
system backgrounds, the ITF is positioned to
follow “ risk- based” leads and then drill down to
the source of fraud, waste or
abuse of public resources.
Th e following are
summaries of the more
notable cases in Fiscal Year
2007- 2008. A complete list
of Investigative Division
reports ( prefi x INV) is
detailed in Appendix A.
North Carolina Central
University
Th e Offi ce of the State
Auditor received an
allegation through the
State Auditor’s Hotline
concerning improper
payments of $ 2,000 checks
to an undergraduate student
and her acquaintances by the North Carolina
Central University Assistant Provost and Associate
Vice- Chancellor of Academic Aff airs ( Assistant
Provost). Allegedly, the Assistant Provost
authorized and made payments for University
work that was not performed and received portions
of the money in return so he could make payments
on his University- issued credit card.
Investigators found that the Assistant Provost
inappropriately authorized graduate assistant
Investigators found that
the Assistant Provost
inappropriately authorized
graduate assistant contracts
and honoraria for unauthorized
individuals. Th e review
discovered nine payments,
totaling $ 36,041, improperly
authorized by the Assistant
Provost.
Annual Report 2008 | Investigative Division
16 Increasing Efficiency... Exposing Fraud
contracts and honoraria for unauthorized
individuals. The review discovered nine payments,
totaling $ 36,041, improperly authorized by the
Assistant Provost. Seven of these payments
were cashed with a total value of $ 15,341. Two
remaining payments valued at $ 20,700 were
authorized or issued but never cashed. In
addition, a review of credit card statements for
the Assistant Provost’s credit card issued by the
University revealed delinquency charges, a notice
of account cancellation and a notice to assign the
account to a collection agent. These findings lend
credibility to the complainant’s assertion that the
Assistant Provost’s actions were taken to help
make his credit card payments.
Investigators also found two employment forms
initiated by the Assistant Provost for an unqualified
student that contained false authorization
signatures and other documentation with either
false information or lack of sufficient approvals.
Further, the review revealed the Assistant Provost
did not report an improper relationship with an
undergraduate student to University officials.
Other findings included the Assistant Provost
charging personal expenses to the University-issued
credit card, graduate assistant payments
were improperly charged to federal grants, and
lack of proper approvals and justifications for
honoraria payments.
Several findings from this investigation
were referred to the U. S. Attorney’s Office,
the District Attorney, and the State Bureau of
Investigation. Investigators recommended the
strongest disciplinary action available against the
Assistant Provost, collection of reimbursement
for unauthorized expenses, and improved
administrative controls. As a result of our
review, the University removed the Assistant
Provost from all administrative responsibilities
and ultimately terminated his employment. In
addition, the Assistant Provost paid restitution to
the University.
Department of Health And Human Services
– Adult Care Licensure Section
The Office of the State Auditor received a com-plaint
through the State Auditor’s Hotline concern-ing
the procedures performed by the North Caro-lina
Department of Health and Human Services’
Adult Care Licensure Section ( ACLS) regarding
its oversight of two adult care homes, one licensed
and the other, unlicensed.
The investigation found that ACLS allowed a li-censed
home’s management structure to continue
in violation of State law despite the high risk of
resident injury or death as documented in a May
2007 citation. The May 2007 citation documented
the improper use of a restraint which resulted in
the death of one resident. After receiving a sus-pension
of admissions and numerous citations, the
adult care home received new ownership although
it continued to include one of the former owners
in the new ownership structure. The North Caro-lina
Administrative Code prohibits the approval of
a new license to management that had a license
suspension in the prior six months.
In addition, the investigation found that ACLS
did not promptly respond to violations discovered
in a county investigation of an unlicensed home.
Furthermore, ACLS failed to notify the respon-sible
persons of the home’s residents that the home
received a cease of operations letter that precluded
the home from feeding and administering medi-cations
to their residents. As a result, this unli-censed
home remained in operation after the cease
operations notification which allowed residents to
North Carolina Office of the State Auditor
Increasing Effi ciency... Exposing Fraud
remain in an environment that jeopardized their
health and safety.
Investigators recommended changes in the li-cense
approval procedures, a restructuring of
complaint responses, and an improved notifi ca-tion
process.
North Carolina
Central University
Th e Offi ce of the State Au-ditor
was contacted by the
University of North Caroli-na
General Administration
aft er they became aware of
allegations regarding po-tential
inappropriate use of
the North Carolina Cen-tral
University ( University)
computer networks. Alleg-edly,
employees within the
University’s Information
Technology Services De-partment
misused the Uni-versity’s
networks and computers by downloading
copyrighted and pornographic materials. In addi-tion,
these employees allegedly circumvented pur-chasing
procedures to acquire items for personal
use.
Forensic analysis of computers and interviews
confi rmed that two University employees misused
University networks by downloading movies,
music, games, soft ware, and pornography. Th e
Data Base Administrator and Information Tech-nology
Manager used the higher- speed Univer-sity
network and servers to download these items
from unauthorized sources. In addition, these
employees distributed these copyrighted materi-als
to friends and business associates in potential
violation of federal copyright law. Investigators
also determined that the Information Technology
Manager was granted access to servers at North
Carolina State University to download music. Un-authorized
access of government computers vio-lates
North Carolina General Statutes.
In compliance with State
law, the State Auditor no-tifi
ed the North Carolina
Attorney General and ap-propriate
law enforcement
agencies of apparent in-stances
of malfeasance, mis-feasance,
or nonfeasance by
an offi cer or State employee.
Auditors recommended
University management
take strong disciplinary ac-tion
against these employ-ees,
determine the extent of
potential security breaches,
off er training to employees,
and work with law enforce-ment
as appropriate. Th e University released these
individuals from employment.
Other fi ndings in the report included the lack
of adequate controls over fi xed assets, absence of
requirements for employees to complete second-ary
employment forms, and inadequate verifi ca-tion
of education and employment credentials
when hiring and promoting employees. Auditors
recommended improved procedures to track fi xed
assets, additional training, and a course of action
for any discrepancies noted during the application
process.
North Carolina State University
During the course of a review at North Carolina
Employees within the
University’s Information
Technology Services
Department misused the
University’s networks and
computers by downloading
copyrighted and
pornographic materials
Annual Report 2008 | Investigative Division
18 Increasing Efficiency... Exposing Fraud
Central University, auditors became aware of a
connection between an information technology
employee at North Carolina State University and
employees under investigation at North Carolina
Central University. Allegedly, the North Carolina
State University employee allowed individuals ex-ternal
to the organization to access the University
computer network to share music files. In addition,
we received allegations that the employee was in-volved
in illegal downloading and distribution of
copyrighted materials.
Forensic analysis of computers and interviews
confirmed that the Operations and Systems Ana-lyst
misused University networks by downloading
movies, music, games, software, pornography, and
violent images. Some of these files were buried
deep within sub- folders indicating an apparent at-tempt
to conceal the content from detection. The
Operations and Systems Analyst used the Univer-sity
servers because of the faster connection speed.
In addition, he admitted to distributing copyright-ed
materials to friends and business associates as
well as using software to break encryption that
protects copyrights.
The investigation also revealed that the Opera-tions
and Systems Analyst intentionally deleted all
information contained on his University- issued
laptop to conceal inappropriate use. Further, he
attempted to notify co- workers to delete suspi-cious
activity. Intentional damage to a govern-ment
computer and obstruction of an audit are
violations of State law.
In addition, the Operations and Systems Ana-lyst
provided access to a University server to al-low
a friend to download music files. State law
prohibits the unauthorized granting of access to a
government computer.
In compliance with State law, the State Audi-tor
notified the North Carolina Attorney General
and appropriate law enforcement agencies of ap-parent
instances of malfeasance, misfeasance, or
nonfeasance by an officer or State employee. Au-ditors
recommended University management take
strong disciplinary action against the employee,
determine the extent of potential security breach-es,
offer training to employees, and work with
law enforcement as appropriate. The University
placed the employee on investigative leave and he
subsequently terminated employment.
North Carolina General Assembly
Investigators received a complaint through the
State Auditor’s Hotline related to a potential con-flict
of interest involving a North Carolina Sena-tor
and his involvement with the day- to- day op-erations
of a stock car racing team owned by his
son and whose major sponsor at the time was Blue
Cross Blue Shield of North Carolina ( BCBSNC).
A review of the allegations confirmed the relation-ship
between the Senator’s son’s racing team and
BCBSNC and revealed that another company the
Senator co- owns with his son has a direct financial
relationship with the racing team. The racing team
used property owned by a company co- owned by
the Senator as collateral to secure a $ 150,000 line
of credit.
Because BCBSNC is a major sponsor of the rac-ing
team and is a company that does business be-fore
committees upon which the Senator presides
( including one which he co- chairs), this situation
is a potential conflict. Furthermore, the potential
conflict of interest was not properly disclosed on
the Statement of Economic Interest filed with the
State Ethics Commission as required. Auditors
recommended that the Senator include all busi-ness
and personal relationships that may create an
North Carolina Office of the State Auditor
Increasing Effi ciency... Exposing Fraud
actual or potential confl ict of interest explicitly as
required by the Statement of Economic Interest.
Piedmont Community College
Th e Offi ce of the State Auditor received an al-legation
that the Director
of the Educational Op-portunity
Center ( EOC)
at Piedmont Community
College ( College) forced
her staff members to submit
false Annual Performance
Reports to the U. S. Depart-ment
of Education. Th e in-vestigation
confi rmed that
the EOC Director submit-ted
Annual Performance
Reports that included in-eligible
individuals to meet
program goals. Intentional
misrepresentation on these
reports is a violation of fed-eral
law.
Th e review also found
that the Director submit-ted
a fi ctitious hotel receipt for reimbursement of
$ 1,646.87, allowed ineligible family members of
staff to attend retreats at a cost of $ 7,668.33, and
gave special benefi ts to family members through
the EOC program. Th e Director included her
son and daughter- in- law as program participants
without proper documentation and provided her
son a cellular phone purchased with grant funds.
Investigators recommended the College reim-burse
the federal granting agency, seek restitution
from the Director, revise the Annual Performance
Reports, and take disciplinary action against the
EOC Director. Th e EOC Director resigned eff ec-tive
March 31, 2008. Pursuant to State law, the
results of the investigation were forwarded to ap-propriate
law enforcement authorities.
University of North
Carolina At Greensboro
Th e Offi ce of the State
Auditor received a com-plaint
through the State Au-ditor’s
Hotline concerning
the improper contracting
for services and related em-ployment
issues at the Uni-versity
of North Carolina at
Greensboro ( UNC- G). Au-ditors
found that the Vice
Chancellor for Information
Technology Services ( ITS)
used $ 431,925 in State funds
to bypass University policy
and inappropriately hire a
contractor referred through
an associate. Th e Vice Chan-cellor
also authorized a pay
increase from $ 150 to $ 200 per hour aft er the con-tractor
requested a higher rate despite the lack of
written justifi cation. Further review revealed a
lack of competition for other contracts for services.
State purchasing policy requires documentation
when competition is not obtained, and University
procedure requires UNC- G legal counsel to review
all outside contracts before they are signed by the
appropriate University employee. Auditors recom-mended
tightening the University’s internal con-trols
and maintaining appropriate documentation.
Th e review also revealed that over $ 65,000 of
Annual Report 2008 | Investigative Division
Th e review also found that
the Director submitted a
fi ctitious hotel receipt for
reimbursement of $ 1,646.87,
allowed ineligible family
members of staff to attend
retreats at a cost of $ 7,668.33,
and gave special benefi ts to
family members through the
EOC program.
20 Increasing Effi ciency... Exposing Fraud
the ITS contract costs related to the contractor’s
commutes from Los Angeles and Las Vegas and
that UNC- G provided excessive reimbursements
for the contractor’s meals including two purchas-es
of alcoholic beverages,
which is prohibited by State
policy. Further, $ 212,000 of
the ITS contract was paid
with student fees. Auditors
recommended ensuring ex-penses
are reasonable and
necessary and that funds are
only used for their intended
purposes.
North Carolina
Department of
State Treasurer
Th e Offi ce of the State
Auditor received a written
request from the Lieutenant
Governor’s General Coun-sel
regarding the possible
misuse of state computers
within the Department of State Treasurer ( State
Treasurer) for political purposes. Allegedly, a pri-vate
citizen used a state computer to send a pub-lic
records request to conduct political campaign
opposition research. Th e investigation confi rmed
that the Senior Advisor to the State Treasurer sent
the public records request through State Treasurer
computers via a private e- mail account belonging
to her father- in- law.
Analysis of State computers assigned to four
State Treasurer employees, who also work part-time
for the State Treasurer’s campaign for gover-nor,
revealed signifi cant evidence of political ac-tivity
using state resources. Auditors found these
employees accessed political websites belonging to
political action committees, polling consultants,
and the North Carolina Democratic Party’s on-line
voter database. In addi-tion,
our review discovered
53 political documents in-cluding
campaign speeches
and donor lists and ap-proximately
60 emails re-garding
campaign activity.
State law prohibits political
activity by State employees
while on duty or using State
resources. Auditors recom-mended
disciplinary action
against the four employees
and improved training for
all State Treasurer staff .
Offi ce of the Lieutenant
Governor
Th e State Treasurer’s
campaign manager sent a
letter to the State Auditor requesting an investiga-tion
into potential political operations within the
Offi ce of the Lieutenant Governor. Th e allegations
concerned state property, including computers,
being used for campaign activity and the use of
the North Carolina State Highway Patrol for trans-portation
to campaign events. Th e investigation
revealed that a private internet connection and
wireless internet router were installed in the Lieu-tenant
Governor’s offi ce in May 2005 for her em-ployees’
personal use. Th e Lieutenant Governor’s
campaign committee paid for the equipment and
internet service.
North Carolina Office of the State Auditor
Analysis of State computers
assigned to four State
Treasurer employees, who
also work part- time for the
State Treasurer’s campaign for
governor, revealed signifi cant
evidence of political activity
using state resources.
Increasing Effi ciency... Exposing Fraud 2
Auditors discovered a lack of policies govern-ing
the use of personal computers and inadequate
monitoring of computer and router use. In ad-dition,
the review found that there are no North
Carolina General Statutes, rules, or regulations
that specifi cally address the security protection
provided the Lieutenant Governor. Auditors
recommended the removal of the private inter-net
access, communication of policies regarding
personal use of computers, and the issuance of an
executive order by the Governor that formally au-thorized
the security protection for the Lieutenant
Governor.
Department of Public Instruction / State
Board of Education
Th e Offi ce of the State Auditor received a com-plaint
through the State Auditor’s Hotline con-cerning
the arrangement that allowed the Chair-man
of the State Board of Education ( State Board)
to rent a car to use while conducting State Board
business. Th e investigation revealed that the rent-al
car arrangement was not the most economical
option. Investigators calculated that leasing the
same vehicle rather than renting it on a monthly
basis would have resulted in a savings of approxi-mately
$ 0.39 per mile or $ 26,445 in total. Further,
the review found that the Chairman was eligible
to drive a state vehicle. Analysis of costs associ-ated
with the assignment of a state vehicle indi-cated
that cost savings of $ 32,695 could have been
achieved. Auditors recommended that alternative
options be pursued and that management monitor
the costs of each option.
Th e investigation also revealed that $ 9,523
related to meals expense was improperly paid
to the State Board Chairman. Auditors recom-mended
the clarifi cation of policies regarding the
reimbursement of expenses for board members
and that the State Board seek re- payment of the
improper meals expenses. Aft er receiving the
draft report, the State Board Chairman repaid the
Department of Public Instruction for meals for
which he was improperly reimbursed.
Annual Report 2008 | Investigative Division
22 Increasing Effi ciency... Exposing Fraud
Performance Audit Division
T he Offi ce of the State Auditor’s
Performance Audit Division is designed
to allow for fl exible deployment of
resources while upholding strict auditing standards.
Unlike prescheduled fi nancial audits, the subjects
of performance audits are chosen at the discretion
of the State Auditor upon
consideration of two
factors: greatest risk
potential and greatest
opportunity for impact.
Upon release, performance
audits provide the public,
agency managers and
program managers with
an objective analysis of
whether State agencies
effi ciently and eff ectively
manage their programs and
activities. Furthermore,
these audits are of particular
value to legislators who must
consider the eff ectiveness
of State programs in funding decisions and to the
taxpayers who pay for those programs.
Th e Performance Audit Division was recognized
by the National State Auditors Association for best
2008 performance audit less than 2000 hours. Th e
audit entitled Internal Auditing in North Carolina
Agencies and Institutions is an example of the
valuable contribution the Performance Audit
Division makes to the Offi ce of the State Auditor
and State government in general.
During 2008, the State Auditor’s Performance
Audit Division continued to produce reports that
are narrow in scope and target specifi c programs
or areas where the State is at greatest risk. Training
for the Division’s auditors and staff focused
on performance- based management, business
process improvement, and contract management.
Training sessions instructed
auditors how to evaluate
the relationship between
program results and the
resources used to achieve
those results, how to
identify opportunities to
make government operate
more effi ciently, and
how to identify contract
management practices that
do not protect the interests of
the State. Th e Performance
Audit Division continues
to concentrate on value-added
and proactive audits
that strengthen the State
Auditor’s watchdog function in State government.
Th e following are summaries of the more notable
cases in Fiscal Year 2007- 2008. A complete list of
Performance Audit Division audits ( prefi x PER) is
detailed in Appendix A.
North Carolina Education Lottery
Th e audit objectives were to determine whether
the North Carolina Education Lottery ( NCEL) uses
performance management best practices, whether
NCEL management compensation is comparable
Th e Performance Audit
Division was recognized
by the National State
Auditors Association for
best 2008 performance
audit less than 2000
hours.
North Carolina Office of the State Auditor
Increasing Effi ciency... Exposing Fraud 2
to lotteries in other states, and whether NCEL
employee and vendor ethnic diversity refl ects
the ethnic diversity of North Carolina’s general
population.
Th e audit found that NCEL suff ers from
four performance management weaknesses: no
documented revenue forecasting methodology;
no formal strategic plan; no ongoing marketing or
operational research; and no full- cost accounting
of promotional events. Th e audit also found
that NCEL management compensation is in line
with lottery management
compensation of bordering
states, and the ethnic
diversity of NCEL
management and staff
is similar to that of
North Carolina’s general
population.
Albemarle Mental
Health Center
Th e audit objective was
to determine whether the
resources provided by
the State were used for
their intended purpose
in a prudent business manner and with proper
oversight.
Th e audit found that the Area Program Director’s
$ 282,663 base salary and the Special Assistant’s
$ 142,848 base salary were excessive. Th e audit also
found that the Center’s Board member expenses
were excessive, and the Board did not monitor
operations and ensure public funds were used in
the most eff ective and effi cient manner to fulfi ll
the Center’s mission.
Academically or Intellectually Gifted
Program
Th e audit objective was to determine whether the
Exceptional Children Division of the Department
of Public Instruction ( DPI) adequately monitors
the use of state funding for the Academically or
Intellectually Gift ed ( AIG) Program.
Th e audit found that the AIG Program was not
monitored at the state level to ensure that local
programs are operated according to documented
plans. Also, DPI did not
monitor local AIG program
expenditures or determine
the quality and eff ectiveness
of local programs.
Department of
Transportation
Highway Project
Schedules And Costs
Th e audit objective was
to determine the extent
to which Transportation
Improvement Program
highway projects are having
schedule delays and cost
increases and the major
categories contributing to these problems.
Th e audit found that the Department of
Transportation ( DOT) did not successfully meet
planned construction schedules, resulting in
$ 152.4 million of additional infl ation related
construction costs. Th e audit also found that DOT
was defi cient in key performance management
control activities and does not have meaningful
and reliable highway performance objectives and
measures.
Th e audit found that the
Area Program Director’s
$ 282,663 base salary and
the Special Assistant’s
$ 142,848 base salary
were excessive.
Annual Report 2008 | Performance Audit Division
24 Increasing Efficiency... Exposing Fraud
Department of Juvenile Justice And
Delinquency Prevention – Juvenile Crime
Prevention Council- funded Programs
The audit objectives were to determine whether
Juvenile Crime Prevention Council ( JCPC) mem-bers
have conflicts of interest, whether JCPC-funded
programs were adequately monitored,
and whether reliable data was available to evaluate
JCPC program effectiveness.
The audit found that some JCPC members ap-pear
to have financial and program evaluation
conflicts of interest between their duty as a council
member to fairly select programs to fund and their
interest as a program manager to maximize fund-ing
for the programs they manage. The audit also
found that the Department of Juvenile Justice and
Delinquency Prevention and County JCPCs did
not adequately monitor JCPC- funded programs,
some JCPC program participation data was inac-curate,
and there were no standardized measurable
performance objectives for each program type.
Department of Health And Human Services
Division of Medical Assistance
The audit objectives were to determine whether
Division of Medical Assistance ( DMA) properly
developed and managed the utilization review
contract for mental health services, and whether
proper protocols were established to ensure that
the authorizations for services were managed
effectively.
The audit found: DMA management disabled
critical controls designed to prevent unauthorized
payments; DMA’s plan for administering
the contract was inadequately documented;
improvement was needed in DMA’s contract
monitoring processes; and DMA may have
overpaid for services under the contract due to not
resolving a settlement agreement.
Department of Environment And Natural
Resources – Division of Air Quality
The objective of the audit was to determine
whether the Division of Air Quality ( DAQ) Title
V air quality permit review process could be more
efficient.
The audit found that by implementing “ LEAN,” a
process improvement technique modeled after the
Toyota Production System, DAQ could increase
the number of air quality permit applications
processed by 52%, thus causing applicants to
receive permits approximately 40% sooner. This
efficiency increase should effectively eliminate the
current backlog of 229 air quality permits by 2009,
as opposed to 2015 using the current process.
DAQ could see an efficiency gain of $ 572,000, the
cost of hiring seven new full- time staff.
North Carolina Office of the State Auditor
Increasing Efficiency... Exposing Fraud 25
T he Information Systems ( IS) Audit
Division’s responsibilities include
analyzing State agency computer
systems to ensure that they are properly secured,
produce accurate financial reports and comply
with State regulations. Staff in this division
conduct their own audits of computer systems
across the State. In addition, they provide IS audit
assistance to financial audit teams to ensure that
agency computerized accounting systems can be
relied upon to produce accurate financial reports.
Without those assurances, financial audit teams
would be unable to issue unqualified opinions on
the accuracy of agency financial statements.
IS auditors are in a unique position to think pro
actively about discovering suspicious data trends
flowing from an agency’s information systems.
The State Auditor’s goal for Fiscal Year 2007-
2008 was to continue the collaboration between
IS auditors and the Financial and Investigative
audit teams and to increase proactive auditing by
providing computer forensic assistance and data
mining analyses of agency financial data.
The IS Audit Division continues to perform
Strategic Audit Reviews that are issued separately
from IS audits. These reviews are used to uncover
fraud, waste or abuse of taxpayer resources by
following suspicious State agency data trends.
While initiated and coordinated by the IS Audit
Division, these reviews involve auditors from all
divisions of the Office of the State Auditor.
Strategic Audit Reviews build a bridge from an
abstract proactive policy to the actual practice of
being proactive. By conducting Strategic Audit
Reviews through the use of data mining analysis,
the State Auditor’s office is in the forefront of
auditing trends. To improve innovation and
effectiveness, the State Auditor continues to work
with leading experts in data mining and plans to
continue to increase the number of Strategic Audit
Reviews to bring more accountability to State
government.
In Fiscal Year 2008- 2009, the IS Audit Division
is implementing an upgrade to the Office of
the State Auditor’s existing audit software. This
software will allow easier access to auditee data
by auditors in other sections of the office and will
allow the use of a built in “ Extract, Transmit, and
Load” ( ETL) technology that will expedite the
acquisition of agency data to be used by Financial
auditors in financial audits and by IS auditors in
their strategic reviews.
The following is a summary of IS Audit
Division’s audits and reviews conducted during
Fiscal Year 2007- 2008. A complete list of IS Audit
Division’s audits and reviews ( prefixes ISA and
SAR) is detailed in Appendix A.
Strategic Audit Review: North Carolina
Division of Social Services
The purpose of this Strategic Audit Review was
to identify invalid Social Security Numbers ( SSNs)
Information Systems Audit
Division
Annual Report 2008 | Information Systems Audit Division
26 Increasing Efficiency... Exposing Fraud
in the North Carolina Division of Social Services.
This review found 1,906 SSNs that were invalid.
The review also found 1,237 SSNs that belonged
to the deceased person’s category on the Social
Security Administration’s Death File. Finally,
the review found 69 food stamp recipients with a
certification date equal to or greater than 45 days
after their date of death.
Strategic Audit Review: North Carolina
State University
The purpose of this Strategic Audit Review was
to identify improper use of procurement cards
( P- Cards) by University employees. This review
found that two University employees used their P-Cards
for personal use. The University had taken
appropriate action on these employees by the time
of our audit.
IS Audit: Community Colleges – General
Controls Reviews
IS Audit staff conducted Information System
audits at the following Community Colleges:
Edgecombe Community College, Blue Ridge
Community College, Wilson Technical Community
College, Rowan- Cabarrus Community College,
Halifax Community College, Piedmont
Community College, Gaston Community College,
Cleveland Community College, Guilford Technical
Community College, Randolph Community
College, Robeson Community College, Catawba
Valley Community College, Central Carolina
Community College, Stanly Community College,
Roanoke- Chowan Community College, Johnston
Community College, Asheville- Buncombe
Community College, Carteret Community College,
James Sprunt Community College, Haywood
Community College, Bladen Community
College, Martin Community College, Brunswick
Community College, McDowell Technical
Community College, Pamlico Community
College, Wilkes Community College, Richmond
Community College, Surry Community College,
Mayland Community College, Fayetteville
Technical Community College, and Wake
Technical Community College.
The primary objective of these audits was to
evaluate the colleges’ IS general controls. The
scope included general security, access controls,
systems software, physical security, and disaster
recovery. Weaknesses noted in access controls
were conveyed to management in a private letter
because of the sensitive nature of the findings,
while the weaknesses that we noted in general
security, systems software, physical security, and
disaster recovery are noted in individual public
reports for each college available to the public on
the State Auditor’s website ( www. ncauditor. net).
IS Audit: North Carolina Information
Technology Services – General Controls
Review
IS audit staff audited North Carolina Information
Technology Services ( ITS). The primary objective
of this audit was to follow- up on the findings
noted in the prior year’s general controls review.
IS audit staff also performed a limited information
systems audit of the application controls for the
ITS MICS Billing System and a review of the ITS
Service Level Agreement process. We found that
ITS was not meeting their targeted resolution time
and target percentage of calls resolved on- time as
stated in the signed Service Level Agreements.
North Carolina Office of the State Auditor
Increasing Effi ciency... Exposing Fraud 2
IS Audit: North Carolina Department of
Health And Human Services – Application
Controls Review
IS audit staff conducted an application
controls review of the County Administration
Reimbursement System at the North Carolina
Department of Health and Human Services. Th e
scope of the audit included
data completeness,
data accuracy, table
maintenance, user access,
processing, and data
backup and recovery. We
did not note any signifi cant
weaknesses in this
application.
IS Audit: North
Carolina Department
of Transportation
– Application Controls
Review
IS audit staff conducted
an application controls review of the Federal
Highway Billing System at the North Carolina
Department of Transportation. Th e scope of the
audit included data completeness, data accuracy,
table maintenance, user access, processing, and
data backup and recovery. We did not note any
signifi cant weaknesses in this application.
IS Audit: North Carolina Department of
Health And Human Services, Division of
Social Services – Application Controls
Review
IS audit staff conducted an application controls
review of the Food Stamps Information Systems
( FSIS) at the North Carolina Department of Health
and Human Services, Division of Social Services.
Th e scope of the audit included data completeness,
data accuracy, data validity, and data authorization.
In the data completeness area we noted that a
SAS 70 Report was not available for a third party
vendor. In the data accuracy area we noted that
there was a lack of program
change controls and a lack
of program run books,
programmer’s manual, and
restart procedures. In the
data validity area we noted
that there was a lack of
segregation of duties in the
recording and approval of
applications through the
FSIS system. In the data
authorization area we noted
that there was information
leakage on the internet
webpage, an inadequate
review of UAudit and
excessive activity reports, and a lack of source
code comparison.
IS Audit: North Carolina Department of
Health And Human Services, Division of
Social Services – Application Controls
Review
IS audit staff conducted an application controls
review of the Eligibility Information Systems ( EIS)
at the North Carolina Department of Health and
Human Services, Division of Social Services. Th e
scope of the audit included data completeness, data
accuracy, data validity, and data authorization. In
the data accuracy area we noted that a budget
e review found 69 food
stamp recipients with a
certi cation date equal to
or greater than 45 days
a er their date of death.
Annual Report 2008 | Information Systems Audit Division
28 Increasing Efficiency... Exposing Fraud
calculation was performed outside of the EIS
application, there was a lack of review of the error
and attention report, there was a lack of program
change controls and a lack of program run books,
programmer’s manual, and restart procedures. In
the data validity area we noted that there was a
lack of segregation of duties in the recording and
approval of applications through the EIS system. In
the data authorization area we noted that there was
information leakage on the internet webpage, an
inadequate review of UAudit and excessive activity
reports, and a lack of source code comparison.
Information Security Vulnerability
Assessments
Funded by lapsed salaries, the Office of the
State Auditor contracted with a private firm to
conduct vulnerability assessments on the North
Carolina Department of Corrections, the North
Carolina Department of Environment and Natural
Resources, and the North Carolina Department
of Public Instruction. The purpose of these
assessments were to gauge the entity’s security
posture at a given point in time, identify security
risks that might make an entity vulnerable to
attack, and determine appropriate procedures to
mitigate the identified risks. The detailed results
of the assessments are kept confidential as to
not announce control weaknesses to would- be
intruders. General results containing the numbers
of high, medium and low weaknesses are released
to the public through the State Auditor’s website
and email notification service.
North Carolina Office of the State Auditor
Office of the state audi tor main office and branc h loca tions
Morganton
Asheville
Charlotte
Fayetteville
Wilmington
Greenville
Edenton
Raleigh
Winston- Salem Greensboro
Increasing Efficiency... Exposing Fraud 29
Personnel
To be a proactive State agency, the Office of the
State Auditor must be a responsible manager of
its personnel. After selecting the best qualified
applicants, the State Auditor’s Office must then
provide quality training to employees and a quality
control review of employees work product.
The Office of the State Auditor continues to work
towards the goal of more effective and efficient audits.
These efficiency gains allow the State Auditor’s Office
to spread out its resources to do more with current
auditor and staff positions.
The follow- up to the 2006 AuditWatch efficiency
curriculum was completed in 2007. Efficiency
levels were analyzed and AuditWatch provided the
State Auditor with feedback in areas that needed
improvement. In 2005, the Office of the State Auditor
used 103,703 audit hours in the Financial Audit
Division alone. After the AuditWatch efficiencies
were in place, the Financial Audit Division used only
87,358 audit hours. This equates to a total efficiency
gain of 15,980 audit hours or $ 1,358,300 ( audit hours
x billing rate).
Recruiting
The State Auditor’s goal is to build relationships with
the right applicants. This will reduce turnover and
eliminate the waste that frequent turnover creates.
The Office of the State Auditor continues its efforts
to hire talented, skilled staff by recruiting on university
campuses across the state. We work with campus
faculty to participate in Beta Alpha Psi meetings,
accounting classes and other events. Significant
effort is made to identify applicants who want to be
challenged yet are looking for a good work- life balance
and want to make an impact as a public servant.
In addition, the State Auditor’s Office has made
great strides in its internship program. Internships
provide individuals an opportunity to perform
meaningful, career- related work with our Agency
prior to their final year in school. If the internship is
successful, the intern may be invited to begin their
career in the State Auditor’s Office. This program
has enabled the State Auditor to hire very talented
individuals who are looking for a long- term
relationship with our office.
Training
In Fiscal Year 2007- 2008, the State Auditor
refined the annual training standard from 65
hours to closer to the CPA Board requirement of
40 hours annually per person. This action saved
taxpayers over 2000 work hours that are now used
for audits, and resulted in the Training Department’s
restructuring. What once required four full- time
staff positions totaling $ 230,741 in Fiscal Year 2006-
2007, now takes one full- time professional in Fiscal
Year 2008- 2009.
In 2008, the State Auditor’s Office became an
authorized continuing professional education ( CPE)
sponsor recognized by the NC State Board of CPA
Examiners. This is part of the ongoing commitment
by the State Auditor to conduct quality continuing
education. The Agency has streamlined the training
process to better focus training in needed areas while
maintaining the flexibility to respond and react to
specific needs. In addition, training competencies
now allow for training needs and also for maximum
audit productivity in line with industry standards.
Quality Controls
The Office of the State Auditor’s work product
is governed by strict adherence to professional
standards promulgated by government agencies
General Administration
Annual Report 2008 | General Administrtion
30 Increasing Efficiency... Exposing Fraud
and professional organizations including the
Governmental Accounting Standards Board, the
Financial Accounting Standards Board, the Federal
Office of Management and Budget, the Government
Accountability Office, the American Institute of
Certified Public Accountants, and various state and
federal laws and regulations. These standards require
that auditors remain independent, be technically
proficient and receive continuing professional
education, obtain sufficient appropriate evidence to
support conclusions, and issue reports that clearly
communicate audit results.
The State Auditor’s Office has a control system
to ensure the quality of audit work. The system
includes supervisory review of all work product and
management review of audit reports and critical
supporting workpapers. The Agency monitors the
effectiveness of its quality control system by having
staff who did not participate in an audit periodically
review the work. To uphold the standards of the
supervisory review, the State Auditor’s goal is that
all newly hired Supervisor level employees and
above in the Financial Audit Division have a valid
CPA license, or the merit- based equivalent in work
experience.
In another layer of review, the Agency receives a
peer review every three years under the direction
of the National State Auditors Association. During
the peer review, members of audit staffs from other
states review the office’s quality control system and
workpapers for compliance with auditing standards.
The most recent peer review was performed in July
2006 and resulted in a clean opinion on the quality
control system.
Processing & Publication
With close to 200 employees in the Office of
the State Auditor, the publishing of audits, reports
and reviews is a complicated and time consuming
process. Magnified by the sensitive nature of the audit
subject matter, the Agency’s administrative staff must
be detail minded and highly organized. The goals of
accuracy and timeliness are the staff’s top priorities.
However without effective publication, the audit,
report or review would go unnoticed.
Publication of the audits, reports and reviews
is an essential part of Agency’s proactive posture.
A report exposing an instance of fraud, waste or
abuse of taxpayers’ resources, if publicized by the
statewide news media, becomes an effective tool
for the deterrence of future fraud, waste or abuse
of taxpayers’ resources. The State Auditor’s Office,
through a positive relationship with the news media,
can pro actively deter others from committing similar
acts of fraud, waste and abuse of taxpayer money.
Budgeting & Purchasing
The Office of the State Auditor is the taxpayers’
watchdog against wasteful spending of State
resources. To be an effective messenger, the Agency
must ensure that its resources are spent as wisely as
possible.
The State Auditor’s budget is approximately $ 18.9
million and the agency bills approximately $ 5.2
million for federal audit work. In addition to the
central office in Raleigh, the Agency has 9 branch
offices throughout the State which our budget office
is responsible for managing financially.
Budgeting and purchasing are governed by strict
rules and regulations. An independent CPA firm
annually conducts a financial audit of the office
and routinely issues a clean opinion of its financial
statements.
Management Information Systems ( MIS)
The Management Information Systems Division
( MIS) of the Office of the State Auditor is charged
with four primary objectives:
North Carolina Office of the State Auditor
Increasing Efficiency... Exposing Fraud 31
• Provide Information Technology services
including Operational Support, Application
Development, Infrastructure Management and
Information Security to Agency Personnel
• Oversight of Senate Bill 991 compliance
• Enterprise Information Technology strategic
planning for the Agency
• Information Technology tactical implementation
in order to increase productivity, efficiency and
security of critical business functions.
In addition to providing for the daily operational
support for Agency personnel, the MIS Division
completed a number of major projects to enhance
the efficiency, quality of service, and security of the
Agency.
MIS worked closely with the Office of the State
Controller to ensure the Agency met all technical
requirements for the Beacon Project ( statewide
payroll application implemented in March 2008).
MIS also worked with ITS and the Enterprise Data
Warehouse service, as the first customer of the
new Statewide Enterprise level service, to complete
the Management Services and Nongovernmental
Compliance Division’s Grants Compliance online
application ( GIC).
MIS has completed an internal upgrade of the
Agency Intranet, completing a change over from
a dynamic site to an industry standard portal
technology site designed to encourage collaboration
among personnel and to enable a more efficient
workflow during audits. In 2008, MIS has been
applying portal technology to reduce administrative
paperwork by developing on- line forms, workflow,
and email alerts. In conjunction with the portal
upgrade, MIS piloted an e- Learning initiative to
make training more efficient and cost effective.
In addition, MIS has upgraded the Agencies
network infrastructure to meet ESAP requirements.
MIS will continue to work closely with ITS
to securely merge the State Auditor’s network
infrastructure into the State of North Carolina’s
architecture. The Agency servers and software have
been upgraded to the latest versions. Finally, the
Business Continuity Plan ( BCP) / Continuation of
Operations Plan ( COOP) was reviewed and tested
to meet State requirements and to address Pandemic
Influenza planning requirements.
In 2009, the MIS Division will continue to provide
quality operational support to Agency personnel.
In addition, the MIS Division will aggressively work
to provide technologies to Agency personnel that
will improve the efficiency and quality of Agency
critical business functions. MIS will continue
to work with the Beacon Project Team to help
develop guidelines and requirements for additional
Beacon initiatives including the SAP Grants
module implementation. The GIC application for
the Management Services and Nongovernmental
Compliance Division will be enhanced to improve
both usability and functionality. Agency personnel
will complete comprehensive training on the new
internal portal. The e- Learning system will be
expanded to incorporate an advanced Learning
Management System solution. This will lead to
expanded education and training opportunities
including the ability to make vital information
available via web casting. In addition, an Agency
wide e- Recruiting solution will be designed and
implemented to assist in the recruitment and hiring
of quality candidates for open Agency positions.
An improved Intrusion Prevention System ( IPS)
will be installed and configured and infrastructure
and security needs will continue to be assessed and
improved where feasible. Finally, the Agency has
been scheduled for ITS consolidation in 2009 and
MIS will work with ITS to ensure that required IT
services are smoothly transitioned to ITS while
maintaining the operational functionality required
for the Office of the State Auditor to perform its
mission.
Annual Report 2008 | General Administrtion
32 Increasing Efficiency... Exposing Fraud
Appendix A
The following reports are listed by report number which correspond to individual agency divisions. These
reports were issued from July 1, 2007 through September 2008.
Report Number Report Title Release Date
FCA- 2007- 2109 Brunswick County Clerk of Superior Court - Fiscal Control Audit 9/ 26/ 07
FCA- 2007- 2126 Currituck County Clerk of Superior Court - Fiscal Control Audit 1/ 29/ 08
FCA- 2007- 2127 Dare County Clerk of Superior Court - Fiscal Control Audit 7/ 10/ 07
FCA- 2007- 2137 Graham County Clerk of Superior Court - Fiscal Control Audit 6/ 29/ 07
FCA- 2007- 2141 Halifax County Clerk of Superior Court - Fiscal Control Audit 11/ 6/ 07
FCA- 2007- 2157 Martin County Clerk of Superior Court - Fiscal Control Audit 9/ 12/ 07
FCA- 2007- 2178 Rockingham County Clerk of Superior Court - Fiscal Control Audit 9/ 25/ 07
FCA- 2007- 2186 Swain County Clerk of Superior Court - Fiscal Control Audit 11/ 26/ 07
FCA- 2007- 2193 Washington County Clerk of Superior Court - Fiscal Control Audit 10/ 12/ 07
FCA- 2008- 2106 Beaufort County Clerk of Superior Court - Fiscal Control Audit 1/ 29/ 08
FCA- 2008- 2132 Edgecombe County Clerk of Superior Court - Fiscal Control Audit 2/ 27/ 08
FCA- 2008- 2151 Jones County Clerk of Superior Court - Fiscal Control Audit 9/ 11/ 08
FCA- 2008- 2171 Perquimans County Clerk of Superior Court - Fiscal Control Audit 1/ 7/ 08
FCA- 2009- 2101 Alexander County Clerk of Superior Court - Fiscal Control Audit 9/ 15/ 08
FCA- 2009- 2111 Burke County Clerk of Superior Court - Fiscal Control Audit 9/ 15/ 08
FCA- 2009- 2149 Jackson County Clerk of Superior Court - Fiscal Control Audit 9/ 17/ 08
FIN- 2006- 6070 North Carolina Agricultural and Technical State University -
Financial Statement Audit 8/ 23/ 07
FIN- 2006- 6086 Elizabeth City State University - Financial Statement Audit 9/ 14/ 07
FIN- 2006- 6088 Fayetteville State University - Financial Statement Audit 12/ 10/ 07
FIN- 2006- 6090 North Carolina Central University - Financial Statement Audit 8/ 17/ 07
FIN- 2006- 6801 South Piedmont Community College - Financial Statement Audit 11/ 14/ 07
FIN- 2006- 6807 Brunswick Community College - Financial Statement Audit 8/ 7/ 07
FIN- 2006- 6822 College of The Albemarle - Financial Statement Audit 7/ 27/ 07
FIN- 2006- 6876 Sampson Community College - Financial Statement Audit 7/ 12/ 07
FIN- 2006- 6878 Sandhills Community College - Financial Statement Audit 8/ 7/ 07
FIN- 2007- 3400 Department of State Treasurer - Statewide Financial Audit Procedures 2/ 5/ 08
FIN- 2007- 3510 Department of Public Instruction - Statewide Financial Audit Procedures 3/ 14/ 08
FIN- 2007- 3700 Department of Agriculture and Consumer Services -
Statewide Financial Audit Procedures 4/ 2/ 08
FIN- 2007- 4160 Office of the State Controller - Statewide Financial Audit Procedures 2/ 1/ 08
FIN- 2007- 4200 Department of Transportation - Statewide Financial Audit Procedures 4/ 2/ 08
FIN- 2007- 4205 North Carolina Turnpike Authority - Financial Statement Audit 5/ 30/ 08
North Carolina Office of the State Auditor
Increasing Efficiency... Exposing Fraud 33
FIN- 2007- 4300 Department of Environment and Natural Resources -
Statewide Financial Audit Procedures 2/ 5/ 08
FIN- 2007- 4410 North Carolina Department of Health and Human Services -
Statewide Financial Audit Procedures 4/ 3/ 08
FIN- 2007- 4600 Department of Commerce - Statewide Financial Audit Procedures 3/ 10/ 08
FIN- 2007- 4620 North Carolina State Ports Authority - Financial Statement Audit 4/ 16/ 08
FIN- 2007- 4650 Employment Security Commission - Statewide Financial Audit Procedures 4/ 2/ 08
FIN- 2007- 4670 North Carolina Education Lottery - Financial Statement Audit 12/ 6/ 07
FIN- 2007- 4700 Department of Revenue - Statewide Financial Audit Procedures 2/ 4/ 08
FIN- 2007- 4900 North Carolina Department of Crime Control and Public Safety -
Statewide Financial Audit Procedures 3/ 27/ 08
FIN- 2007- 6020 University of North Carolina at Chapel Hill - Financial Statement Audit 3/ 25/ 08
FIN- 2007- 6030 North Carolina State University - Financial Statement Audit 2/ 1/ 08
FIN- 2007- 6040 The University of North Carolina at Greensboro - Financial Statement Audit 1/ 29/ 08
FIN- 2007- 6050 University of North Carolina at Charlotte - Financial Statement Audit 2/ 5/ 08
FIN- 2007- 6055 The University of North Carolina at Asheville - Financial Statement Audit 5/ 28/ 08
FIN- 2007- 6060 University of North Carolina Wilmington - Financial Statement Audit 2/ 20/ 08
FIN- 2007- 6065 East Carolina University - Financial Statement Audit 3/ 12/ 08
FIN- 2007- 6070 North Carolina Agricultural and Technical State University -
Financial Statement Audit 5/ 30/ 08
FIN- 2007- 6075 Western Carolina University - Financial Statement Audit 5/ 9/ 08
FIN- 2007- 6080 Appalachian State University - Financial Statement Audit 1/ 2/ 08
FIN- 2007- 6082 The University of North Carolina at Pembroke - Financial Statement Audit 6/ 2/ 08
FIN- 2007- 6084 Winston- Salem State University - Financial Statement Audit 4/ 3/ 08
FIN- 2007- 6086 Elizabeth City State University - Financial Statement Audit 7/ 2/ 08
FIN- 2007- 6088 Fayetteville State University - Financial Statement Audit 5/ 30/ 08
FIN- 2007- 6090 North Carolina Central University - Financial Statement Audit 7/ 15/ 08
FIN- 2007- 6092 North Carolina School of the Arts - Financial Statement Audit 5/ 1/ 08
FIN- 2007- 6095 University of North Carolina Hospitals - Financial Statement Audit 11/ 14/ 07
FIN- 2007- 6801 South Piedmont Community College - Financial Statement Audit 5/ 21/ 08
FIN- 2007- 6802 Asheville Buncombe Technical Community College - Financial Statement Audit 5/ 28/ 08
FIN- 2007- 6804 Beaufort County Community College - Financial Statement Audit 3/ 7/ 08
FIN- 2007- 6807 Brunswick Community College - Financial Statement Audit 5/ 20/ 08
FIN- 2007- 6810 Cape Fear Community College - Financial Statement Audit 5/ 14/ 08
FIN- 2007- 6812 Carteret Community College - Financial Statement Audit 5/ 9/ 08
FIN- 2007- 6814 Catawba Valley Community College - Financial Statement Audit 4/ 14/ 08
FIN- 2007- 6820 Cleveland Community College - Financial Statement Audit 5/ 28/ 08
FIN- 2007- 6830 Edgecombe Community College - Financial Statement Audit 4/ 2/ 08
FIN- 2007- 6832 Fayetteville Technical Community College - Financial Statement Audit 6/ 13/ 08
Annual Report 2008 | Appendix A
34 Increasing Efficiency... Exposing Fraud
FIN- 2007- 6836 Gaston College - Financial Statement Audit 5/ 30/ 08
FIN- 2007- 6838 Guilford Technical Community College - Financial Statement Audit 5/ 21/ 08
FIN- 2007- 6842 Haywood Community College - Financial Statement Audit 3/ 14/ 08
FIN- 2007- 6843 Blue Ridge Community College - Financial Statement Audit 3/ 19/ 08
FIN- 2007- 6846 James Sprunt Community College - Financial Statement Audit 2/ 21/ 08
FIN- 2007- 6847 Johnston Community College - Financial Statement Audit 6/ 9/ 08
FIN- 2007- 6850 Martin Community College - Financial Statement Audit 3/ 14/ 08
FIN- 2007- 6851 Mayland Community College - Financial Statement Audit 5/ 22/ 08
FIN- 2007- 6852 McDowell Technical Community College - Financial Statement Audit 3/ 14/ 08
FIN- 2007- 6853 Mitchell Community College - Financial Statement Audit 3/ 12/ 08
FIN- 2007- 6854 Montgomery Community College - Financial Statement Audit 5/ 22/ 08
FIN- 2007- 6860 Pamlico Community College - Financial Statement Audit 5/ 9/ 08
FIN- 2007- 6861 Piedmont Community College - Financial Statement Audit 5/ 20/ 08
FIN- 2007- 6866 Richmond Community College - Financial Statement Audit 5/ 30/ 08
FIN- 2007- 6874 Rowan- Cabarrus Community College - Financial Statement Audit 5/ 20/ 08
FIN- 2007- 6880 Southeastern Community College - Financial Statement Audit 5/ 14/ 08
FIN- 2007- 6882 Southwestern Community College - Financial Statement Audit 5/ 28/ 08
FIN- 2007- 6883 Stanly Community College - Financial Statement Audit 5/ 21/ 08
FIN- 2007- 6884 Surry Community College - Financial Statement Audit 5/ 21/ 08
FIN- 2007- 6890 Wake Technical Community College - Financial Statement Audit 5/ 28/ 08
FIN- 2007- 6896 Wilkes Community College - Financial Statement Audit 5/ 22/ 08
FIN- 2007- 6898 Wilson Technical Community College - Financial Statement Audit 5/ 28/ 08
FIN- 2007- 8303 USS North Carolina Battleship Commission - Financial Statement Audit 5/ 28/ 08
FIN- 2007- 8410 NC Teachers and State Employees Comprehensive Major Medical Plan 1/ 29/ 08
FIN- 2007- 8530 North Carolina Global Transpark Authority 1/ 2/ 08
FIN- 2007- 8550 North Carolina Agricultural Finance Authority 5/ 14/ 08
FIN- 2007- 8560 Wireless Emergency Telephone System Fund - Financial Statement Audit 5/ 29/ 08
FIN- 2007- 8730 Statewide Single Audit 4/ 8/ 08
GRA- 2007- 0014 Review of North Carolina Fair Housing Center State Grant 7/ 20/ 07
GRA- 2007- 0028 Review of Carolyns Little Castle State Grant 9/ 13/ 07
GRA- 2007- 0031 Review of The Kids Place Day Care State Grant 8/ 22/ 07
GRA- 2007- 0032 Review of United Community Ministries State Grant 7/ 16/ 07
GRA- 2007- 0033 Review of Wayne Memorial Hospital State Grant 7/ 19/ 07
GRA- 2007- 0037 Review of East Spencer New Beginning Community Development State Grant 11/ 29/ 07
GRA- 2007- 0038 Review of Operation Sickle Cell Inc. State Grant 2/ 18/ 08
GRA- 2008- 0039 Review of Teaching Academics for Life Learning Outreach Ministries State Grant 9/ 13/ 07
GRA- 2008- 0040 Review of Wee Care Inc. State Grant 2/ 1/ 08
GRA- 2008- 0041 Review of Primary Colors Day Care Center State Grant 11/ 13/ 07
North Carolina Office of the State Auditor
Increasing Efficiency... Exposing Fraud 35
GRA- 2008- 0042 Review of North Hills Child Care Center State Grant 9/ 13/ 07
GRA- 2008- 0043 Review of Hoke County Youth & Family Services Inc. State Grant 3/ 13/ 08
GRA- 2008- 0044 Review of Healthy Mothers Healthy Babies Coalition of Wake County State Grant 11/ 1/ 07
GRA- 2008- 0045 Review of Durham Nursery & Preschool State Grant 2/ 1/ 08
GRA- 2008- 0046 Review of Infants Palace Day Care Inc. State Grant 8/ 23/ 07
GRA- 2008- 0047 Review of JSL Development Center State Grant 11/ 14/ 07
GRA- 2008- 0048 Review of Appletree Day Care Inc. State Grant 8/ 30/ 07
GRA- 2008- 0049 Review of Life After Life Inc. State Grant 9/ 11/ 07
GRA- 2008- 0050 Review of the Boys and Girls Club of Wake County State Grant 4/ 25/ 08
GRA- 2008- 0051 Review of Mediation Services of Forsyth County State Grant 11/ 13/ 07
GRA- 2008- 0052 Review of Microenterprise Loan Program of Winston- Salem State Grant 3/ 3/ 08
GRA- 2008- 0053 Review of The Salvation Army Charlotte State Grant 9/ 17/ 07
GRA- 2008- 0054 Review of Sandhills Community Action Program Inc. State Grant 6/ 11/ 08
GRA- 2008- 0055 Review of Tar Heel Volunteer Rescue Squad State Grant 8/ 17/ 07
GRA- 2008- 0058 Review of Windows of the World CDC State Grant 11/ 13/ 07
GRA- 2008- 0060 Review of Stem Community Fire Department EMS State Grant 4/ 25/ 08
GRA- 2008- 0061 Review of The Enola Group Inc. State Grant 5/ 29/ 08
GRA- 2008- 0062 Review of Prevent Blindness North Carolina State Grant 7/ 28/ 08
GRA- 2008- 0065 Review of Martin County Community Action State Grant 9/ 4/ 08
GRA- 2008- 0068 Review of the North Carolina Pottery Center State Grant 7/ 17/ 08
INV- 2006- 0307F Follow- up to Tire Retread Contract 3/ 11/ 08
INV- 2007- 0318F University of North Carolina Hospitals/ University of North Carolina
School of Pharmacy - Follow- up 2/ 28/ 08
INV- 2007- 0319 University of North Carolina at Greensboro 7/ 11/ 07
INV- 2007- 0320 North Carolina Department of Transportation 8/ 28/ 07
INV- 2007- 0321 North Carolina Department of Administration 9/ 4/ 07
INV- 2007- 0322 East Carolina University 9/ 7/ 07
INV- 2007- 0323 North Carolina Department of Transportation 9/ 12/ 07
INV- 2007- 0324 North Carolina Department of Commerce 10/ 1/ 07
INV- 2007- 0325 North Carolina Department of Environment and Natural Resources 10/ 23/ 07
INV- 2007- 0326 Department of Public Instruction 11/ 27/ 07
INV- 2007- 0327 “ The Conflict Resolution Center, Inc.” 11/ 28/ 07
INV- 2008- 0328 Office of the Lieutenant Governor 1/ 31/ 08
INV- 2008- 0329 North Carolina Department of State Treasurer 1/ 31/ 08
INV- 2008- 0330 North Carolina Central University 2/ 12/ 08
INV- 2008- 0331 Piedmont Community College 3/ 24/ 08
INV- 2008- 0332 North Carolina Department of Health and Human Services 4/ 29/ 08
INV- 2008- 0333 North Carolina General Assembly 5/ 27/ 08
Annual Report 2008 | Appendix A
36 Increasing Efficiency... Exposing Fraud
INV- 2008- 0334 North Carolina State Board of Elections 5/ 13/ 08
INV- 2008- 0335 University of North Carolina at Greensboro 5/ 29/ 08
INV- 2008- 0336 North Carolina State University 6/ 17/ 08
INV- 2008- 0337 North Carolina Central University 6/ 17/ 08
INV- 2008- 0338 North Carolina Department of Health and Human Services 7/ 31/ 08
INV- 2008- 0339 Autism Society of North Carolina 8/ 21/ 08
INV- 2008- 0340 North Carolina State Ethics Commission 9/ 18/ 08
INV- 2008- 0341 Robeson Community College 9/ 23/ 08
ISA- 2007- 4300 North Carolina Department of Environment and Natural Resources 9/ 17/ 07
ISA- 2007- 4410 North Carolina Department of Health and Human Services/
County Administration Reimbursement System 9/ 7/ 07
ISA- 2007- 4500 North Carolina Department of Corrections 7/ 3/ 07
ISA- 2007- 4660 Information Technology Services 9/ 4/ 07
ISA- 2007- 6802 Asheville- Buncombe Technical Community College 10/ 22/ 07
ISA- 2007- 6806 Bladen Community College 11/ 30/ 07
ISA- 2007- 6807 Brunswick Community College 1/ 2/ 08
ISA- 2007- 6812 Carteret Community College 11/ 7/ 07
ISA- 2007- 6814 Catawba Valley Community College 9/ 14/ 07
ISA- 2007- 6816 Central Carolina Community College 9/ 18/ 07
ISA- 2007- 6820 Cleveland Community College 8/ 22/ 07
ISA- 2007- 6830 Edgecombe Community College 7/ 3/ 07
ISA- 2007- 6836 Gaston College 8/ 22/ 07
ISA- 2007- 6838 Guilford Technical Community College 9/ 7/ 07
ISA- 2007- 6840 Halifax Community College 7/ 20/ 07
ISA- 2007- 6842 Haywood Community College 11/ 29/ 07
ISA- 2007- 6843 Blue Ridge Community College 7/ 13/ 07
ISA- 2007- 6846 James Sprunt Community College 11/ 7/ 07
ISA- 2007- 6847 Johnston Community College 10/ 2/ 07
ISA- 2007- 6850 Martin Community College 12/ 13/ 07
ISA- 2007- 6852 McDowell Technical Community College 1/ 2/ 08
ISA- 2007- 6860 Pamlico Community College 1/ 3/ 08
ISA- 2007- 6861 Piedmont Community College 7/ 20/ 07
ISA- 2007- 6864 Randolph Community College 9/ 14/ 07
ISA- 2007- 6868 Roanoke- Chowan Community College 10/ 2/ 07
ISA- 2007- 6870 Robeson Community College 9/ 14/ 07
ISA- 2007- 6874 Rowan- Cabarrus Community College 7/ 18/ 07
ISA- 2007- 6883 Stanly Community College 9/ 18/ 07
ISA- 2007- 6896 Wilkes Community College 1/ 3/ 08
North Carolina Office of the State Auditor
Increasing Efficiency... Exposing Fraud 37
ISA- 2007- 6898 Wilson Technical Community College 7/ 16/ 07
ISA- 2008- 4200 North Carolina Department of Transportation 2/ 15/ 08
ISA- 2008- 4440A Department of Health and Human Services 3/ 27/ 08
ISA- 2008- 4440B Department of Health and Human Services 3/ 27/ 08
ISA- 2008- 4700 North Carolina Department of Revenue 9/ 12/ 08
ISA- 2008- 6832 Fayetteville Technical Community College 3/ 3/ 08
ISA- 2008- 6851 Mayland Community College 1/ 25/ 08
ISA- 2008- 6866 Richmond Community College 1/ 7/ 08
ISA- 2008- 6884 Surry Community College 1/ 23/ 08
ISA- 2008- 6890 Wake Technical Community College 3/ 6/ 08
NGV- 2006- 9101 North Carolina Partnership for Children Inc. - Financial Statement Audit 7/ 16/ 07
NGV- 2006- 9110 Mecklenburg Partnership for Children - Financial Statement Audit 7/ 30/ 07
NGV- 2006- 9127 Buncombe County Partnership for Children Inc. - Financial Statement Audit 6/ 29/ 07
NGV- 2007- 9101 North Carolina Partnership for Children Inc. - Financial Statement Audit 5/ 30/ 08
NGV- 2007- 9102 Burke County Smart Start Inc. - Financial Statement Audit 2/ 11/ 08
NGV- 2007- 9103 Caldwell County Smart Start A Partnership for Young Children -
Financial Statement Audit 5/ 20/ 08
NGV- 2007- 9104 Cleveland County Partnership for Children Inc. - Financial Statement Audit 2/ 1/ 08
NGV- 2007- 9108 Hertford County Partnership for Children Inc. - Financial Statement Audit 2/ 11/ 08
NGV- 2007- 9109 Jones County Partnership for Children - Financial Statement Audit 4/ 4/ 08
NGV- 2007- 9111 Orange County Partnership for Young Children - Financial Statement Audit 3/ 3/ 08
NGV- 2007- 9114 Ashe County Partnership for Children - Financial Statement Audit 2/ 11/ 08
NGV- 2007- 9115 Avery County Smart Start: A Partnership for Children - Financial Audit 5/ 1/ 08
NGV- 2007- 9117 Chatham County Partnership for Children - Financial Statement Audit 2/ 21/ 08
NGV- 2007- 9119 Durham Partnership for Children - Financial Statement Audit 3/ 4/ 08
NGV- 2007- 9122 Lenoir/ Greene Partnership for Children Inc. - Financial Statement Audit 2/ 13/ 08
NGV- 2007- 9124 Person County Partnership for Children - Financial Statement Audit 3/ 20/ 08
NGV- 2007- 9126 Alleghany Partnership for Children Inc. - Financial Statement Audit 5/ 21/ 08
NGV- 2007- 9129 Pamlico Partnership for Children Inc. - Financial Statement Audit 4/ 14/ 08
NGV- 2007- 9130 Randolph County Partnership - Financial Statement Audit 2/ 20/ 08
NGV- 2007- 9132 Rutherford/ Polk Smart Start Partnership - Financial Statement Audit 5/ 9/ 08
NGV- 2007- 9136 Tyrrell- Washington Partnership for Children Inc. - Financial Statement Audit 1/ 15/ 08
NGV- 2007- 9137 Wilson County Partnership for Children - Financial Statement Audit 5/ 20/ 08
NGV- 2007- 9138 Anson County Partnership for Children - Financial Statement Audit 2/ 15/ 08
NGV- 2007- 9139 Smart Start of Brunswick County Inc. - Financial Statement Audit 6/ 4/ 08
NGV- 2007- 9140 The Bertie County Partnership for Children Inc. - Financial Statement Audit 5/ 1/ 08
NGV- 2007- 9143 Guilford County Partnership for Children - Financial Statement Audit 3/ 3/ 08
NGV- 2007- 9144 Hoke County Partnership for Children and Families - Financial Statement Audit 2/ 27/ 08
Annual Report 2008 | Appendix A
38 Increasing Efficiency... Exposing Fraud
NGV- 2007- 9146 Lee County Partnership for Children - Financial Statement Audit 4/ 25/ 08
NGV- 2007- 9150 Alamance Partnership for Children - Financial Statement Audit 2/ 1/ 08
NGV- 2007- 9151 Alexander County Partnership for Children - Financial Statement Audit 3/ 20/ 08
NGV- 2007- 9152 Beaufort Hyde Partnership for Children - Financial Statement Audit 2/ 15/ 08
NGV- 2007- 9153 Bladen Smart Start A Partnership for Childern Inc. - Financial Statement Audit 5/ 21/ 08
NGV- 2007- 9155 Carteret County Partnership for Children - Financial Statement Audit 3/ 19/ 08
NGV- 2007- 9157 The Chowan/ Perquimans Smart Start Partnership - Financial Statement Audit 3/ 19/ 08
NGV- 2007- 9160 Smart Start of Davie County Inc. - Financial Statement Audit 4/ 4/ 08
NGV- 2007- 9161 Franklin- Granville- Vance Partnership for Children Inc. -
Financial Statement Audit 2/ 15/ 08
NGV- 2007- 9163 Harnett County Partnership for Children - Financial Statement Audit 2/ 27/ 08
NGV- 2007- 9164 Smart Start of Henderson County Inc. - Financial Statement Audit 5/ 2/ 08
NGV- 2007- 9166 Partnership for Children of Johnston County Inc. - Financial Statement Audit 3/ 19/ 08
NGV- 2007- 9167 Partnership for Children of Lincoln Gaston Counties Inc. -
Financial Statement Audit 1/ 16/ 08
NGV- 2007- 9168 Madison County Partnership for Children and Families Inc. -
Financial Statement Audit 2/ 11/ 08
NGV- 2007- 9170 The Mitchell Yancey County Partnership for Children Inc. -
Financial Statement Audit 5/ 2/ 08
NGV- 2007- 9171 Northampton Partnership for Children Inc. - Financial Statement Audit 2/ 15/ 08
NGV- 2007- 9176 Montgomery County Partnership for Children - Financial Statement Audit 7/ 28/ 08
NGV- 2007- 9180 Smart Start of Transylvania County - Financial Statement Audit 5/ 28/ 08
NGV- 2007- 9182 Union County Partnership for Children - Financial Statement Audit 4/ 4/ 08
NGV- 2007- 9184 The Partnership for Children of Wayne County Inc. - Financial Statement Audit 3/ 4/ 08
NGV- 2007- 9185 Smart Start of Yadkin County Inc. - Financial Statement Audit 2/ 13/ 08
NGV- 2007- 9186 Richmond County Partnership for Children - Financial Statement Audit 4/ 25/ 08
PER- 2007- 7226 Enterprise Project Management Office 7/ 26/ 07
PER- 2007- 7227 State Childrens Health Insurance Program Claims Processing 7/ 24/ 07
PER- 2007- 7229 Department of Transportation Highway Project Schedules and Costs 2/ 7/ 08
PER- 2007- 7229A Attachments to Dept. of Transportation Highway Project Schedules and Costs 2/ 7/ 08
PER- 2007- 7230 North Carolina Department of Transportation Funding Allocation Practices 6/ 3/ 08
PER- 2007- 7231 Albemarle Mental Health Center 10/ 9/ 07
PER- 2007- 7232 Academically or Intellectually Gifted Program 2/ 14/ 08
PER- 2007- 7233 North Carolina Education Lottery - Performance Audit 4/ 10/ 08
PER- 2007- 7236 Department of Environment and Natural Resources - Division of Air Quality 4/ 17/ 08
PER- 2007- 7801 Information Technology Services & Wildlife Resources Commission 3/ 26/ 08
PER- 2008- 7223F Follow- up to Office of Indigent Defense Services 2/ 8/ 08
SAR- 2007- 4440 North Carolina Division of Social Services 12/ 12/ 07
SAR- 2008- 6030 North Carolina State University 6/ 4/ 08
SAR- 2008- 6040 University of North Carolina at Greensboro 9/ 4/ 08
North Carolina Office of the State Auditor
Increasing Efficiency... Exposing Fraud 39
Appendix B
The Office of the State Auditor independently
evaluates the state’s fiscal accountability
and public program performance for North
Carolina’s citizens and others. The office strives
to assure that state government is executing its
management responsibilities in compliance with
applicable laws, rules, regulations, and policies.
The office also evaluates whether sufficient
management controls and policies exist to enable
state agencies to most efficiently and effectively
use public resources.
STATUTORY AUTHORITY
North Carolina General Statutes § § 147- 64.1-
64.14 set forth the duties and responsibilities of
the State Auditor, and requires the State Auditor
be independent of the organizations being audited.
These statutes mandate that all state agencies and
entities partially or entirely supported by public
funds be subject to audit by the state auditor. These
audits independently evaluate public program
performance for the General Assembly, Governor,
executive departments and agencies, governing
bodies, and the general public. Specifically, the
State Auditor independently examines and makes
findings of fact on whether State agencies:
■ established adequate operating and administrative
procedures, reporting systems, and elements of
management control
■ provided financial and other reports that disclose
fairly, consistently, fully, and promptly all
information necessary to demonstrate program
performance
■ collected, deposited, and properly accounted for
all revenues and receipts arising from activities
■ conducted programs and expended funds in an
efficient and economical manner as well as in
compliance with applicable laws and regulations
■ determined that programs effectively served the
legislative intent.
The Office of the State Auditor is also statutorily
mandated to conduct certain audits, including the
largest audit, the State’s Comprehensive Annual
Financial Report ( CAFR). These audits are required
to be conducted in accordance with appropriate
professional standards.
The Investigative staff is statutorily mandated to
investigate allegations of improper activities, which
may occur as a result of misfeasance, malfeasance or
nonfeasance by governmental employees or those
receiving state money. Investigators are required
to protect complainants who provide information
to the State Auditor related to these charges. This
section operates under the supervision of the Chief
Deputy State Auditor.
CONSTITUTIONAL AGENCY
The State Auditor is a constitutional officer listed
in the North Carolina Constitution under Article III,
§ 7. The State Auditor is elected statewide every four
years and is a member of the Council of State which
also includes the Governor, Lieutenant Governor,
Secretary of State, State Treasurer, Superintendent
of Public Instruction, Attorney General,
Commissioner of Agriculture, Commissioner of
Labor, and Commissioner of Insurance.
Statutory and Constitutional Authority
Annual Report 2008 | Appendix B
40 Increasing Efficiency... Exposing Fraud
SENIOR MANAGEMENT TEAM
Leslie W. Merit, Jr., CPA, CFP
State Auditor
Leslie_ Merritt@ ncauditor. net
( 919) 807- 7500
Kris Bailey, J. D.
Chief Deputy
Kris_ Bailey@ ncauditor. net
( 919) 807- 7665
Jef Henderson, CPA, CISA,
Deputy State Auditor
Jeff_ Henderson@ ncauditor. net
( 919) 807- 7513
Charles K. Ducket
Personnel Officer
Charles_ Duckett@ ncauditor. net
( 919) 807- 7617
James L. Forte
Director of Internal Operations and
Legislative Affairs
James_ Forte@ ncauditor. net
( 919) 807- 7642
Rene Gelerson
Executive Assistant to the Chief Deputy
Renee_ Gellerson@ ncauditor. net
( 919) 807- 7628
Cindy Giliam
Controller
Cindy_ Gilliam@ ncauditor. net
( 919) 807- 7553
Timothy J. Hoegemeyer, J. D.,
MPA
General Counsel
Tim_ Hoegemeyer@ ncauditor. net
( 919) 807- 7670
Christopher F. Mears, J. D., MPP
Director of Public Affairs
Chris_ Mears@ ncauditor. net
( 919) 807- 7566
Pat Stusie
Executive Assistant to the Auditor
Pat_ Stussie@ ncauditor. net
( 919) 807- 7676
Leny Supervile , Ph. D.
Chief Information Officer
Lenny_ Superville@ ncauditor. net
( 919) 807- 7625
AUDIT MANAGEMENT TEAM
Keneth Barnete, CPA, MBA
Specialty: Performance Audits
Kenneth_ Barnette@ ncauditor. net
( 919) 807- 7540
Joyce Flowers, CPA
Specialty: Single Audit
Wilmington Branch
Joyce_ Flowers@ ncauditor. net
( 919) 807- 7550
Janet Hayes , CPM, CICA, MBA
Specialty: Services to nongovernmental
groups
Janet_ Hayes@ ncauditor. net
( 919) 807- 7558
Linda Holar, CPA
Specialty: Universities, UNC, UNC
Hospitals, NCSU
Linda_ Hollar@ ncauditor. net
( 919) 807- 7565
Lee Linker, CPA
Specialty: Quality Control
Lee_ Linker@ ncauditor. net
( 919) 807- 7583
David Nance, CPA
Specialty: Health Issues
David_ Nance@ ncauditor. net
( 919) 807- 7660
Frank L. Pery
Specialty: Investigative Audits
Frank_ Perry@ ncauditor. net
( 919) 807- 7604
Lyne Sanders, CPA
Specialty: CAFR
Lynne_ Sanders@ ncauditor. net
( 919) 807- 7615
Carol Smith, CPA
Specialty: Community Colleges
Asheville Branch
Charlotte Branch
Morganton Branch
Winston- Salem Branch
Carol_ Smith@ ncauditor. net
( 336) 585- 2513
Faye Stele, CPA
Specialty: Clerks of Court
Fayetteville Branch
Greensboro Branch
Greenville Branch
Edenton Branch
Faye_ Steele@ ncauditor. net
( 919) 807- 7589
Charles Wiliford, CPA, CITP,
CISA, CFE, CPM
Specialty: Information Systems Audits
Charles_ Williford@ ncauditor. net
( 919) 807- 7627
Copies of reports issued by the Office of the State
Auditor may be requested through the email link on
the web site at www. ncauditor. net or by calling the
main phone number. Other inquiries, comments,
and suggestions may be made by contacting the
main office or one of the staff members listed below.
N. C. Office of the State Auditor
2 South Salisbury Street
20601 Mail Service Center
Raleigh, NC 27699- 0601
Main Phone Number: ( 919) 807- 7500
Hotline Number: ( 800) 730- 8477
Fax Number: ( 919) 807- 7600
Contact Information
North Carolina Office of the State Auditor
North Carolina Office of the State Auditor
2 South Salisbury Street
20601 Mail Service Center
Raleigh, NC 27699- 0601
Main Phone Number: ( 919) 807- 7500
Hotline Number: ( 800) 730- 8477
Fax Number: ( 919) 807- 7647
OSA printed this report in- house as a cost saving measure for taxpayers.